- US IRS recently published a draft with instructions on how crypto users should file their tax reports.
- The agency insists that anyone who bought crypto in 2020 needs to report it in their form.
- But, since crypto purchases are not taxable events, coin buyers do not have anything else to report.
The US IRS (Internal Revenue Service) recently released revised draft instruction for the country’s tax filers. The tax agency used the opportunity to remind the country’s citizens that crypto users need to admit their dealings with digital currencies when filling up the IRS tax forms.
The IRS insists: Anyone who bought crypto needs to admit it
The IRS started a new campaign of reminding the US tax filers in 2021 that they are obligated to disclose and clarify their crypto purchases. The agency insists that any crypto purchase counts as a virtual currency transaction, and as such, it must be listed in the tax report.
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The instructions are rather clear — anyone who bought digital coins in 2020 needs to answer “yes” to a Form 1040 crypto question. The question, for those who may have missed it, is “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
Now, not any dealing with digital coins need to be reported, according to the IRS. Users who only held coins in their possession, or transferred them between different wallets that they own do not have to disclose such cases of crypto management.
The IRS updated their October 2020 draft
One interesting thing that some crypto users have noticed is that the previous instructions page — the one released in October 2020 — did not include purchases. Crypto users were only obligated to report transfers of coins such as airdrops, hard forks, as well as sales, trades, and alike.
However, it did not specifically say that users must report purchases. The new draft, published on the last day of 2020 — December 31st — was the first iteration that had it included.
According to CoinTracker’s Head of Tax Strategy, Shehan Chandraskera, this clarification is very important. Before, the draft only mentioned “financial interest,” which is a very broad category. Specifying what the IRS wanted is a good way for crypto users to accurately fill out their taxes without having to interpret the law themselves.
One last thing to note is that, despite the fact that crypto users need to select “yes” on their forms — buying crypto is not a taxable event in the US. As a result, there is nothing to report apart from admitting that the tax filer is a crypto buyer. This leads to the question of why the IRS wants to know this? So far, there is no clear answer.
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