Tax-paying American’s will be asked to declare if they’ve engaged in any cryptocurrency transactions on page one of the 2020 Internal Revenue Service’s individual tax return.
As reported by Forbes, the IRS released a draft of the Form 1040 which American’s will use to file their 2020 tax returns. A major change that has been noted is a question relating to the use of cryptocurrency by the individual now featured on the very first page of the document.
The question is posed directly beneath the blocks used to capture an individual’s particulars and hones in directly on the use of cryptocurrencies:
“At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
The question suggests that the IRS is making a more concerted effort to ascertain just how many tax-payers are using cryptocurrencies. The government tax collector has long been concerned that American’s are not declaring income or losses from cryptocurrency trading.
Under the microscope
Americans were asked to declare their cryptocurrency activity in last year’s IRS Form 1040 but the question featured on a seperate page of the document.
Decrypt also notes that not all taxpayers have to file a Schedule 1 tax return. The section is aimed at taxpayers earning income outside of the conventional W-2 earnings that are derived from regular employment.
This means that people that didn’t have to file Schedule 1 information could essentially negate to declare any cryptocurrency trading and profits liable for tax in years gone by.
The American tax authority declared cryptocurrency in the same class as property assets that are liable to capital gains tax depending on how long the asset has been held back in 2014. For the past six years Americans have known to be cognisant that the tax man would be on the lookout for those actively using, trading or holding cryptocurrencies.
IRS has pushed for information
Under the impression that many Americans weren’t declaring their cryptocurrency holdings, the IRS has gone as far as sending tax compliance letters to over 10000 users of American cryptocurrency exchange Coinbase, as reported by Cointelegraph last year.
Back in 2017 the IRS had tried to get Coinbase to hand over information on all of its US users in an effort to curb tax evasion, which it eventually eased off on amid concerns that the IRS was overstepping its authority.
A year later the IRS reported that only 0.04 percent of users in America had reported their cryptocurrency holdings in 2018 – showing the sheer extent of people avoiding paying tax on their digital asset holdings.