The US Tax Administration (IRS) resolved an uncertainty about cryptocurrency with a statement released on Tuesday. Accordingly, citizens do not have to submit a special statement for the cryptocurrencies they buy with fiat currency.
American citizens fill out a form called Form 1040 to report income tax to the IRS. Wishing to collect information on cryptocurrency usage, the IRS included the following question on the first page of the form it distributed for 2020:
“Have you ever bought, sold, transferred or otherwise acquired any digital currency during 2020?”
Buyers with dollars will not report
The fact that the IRS did not prepare a guide on this question raised some question marks as to how the question should be answered. One of those questions was:
“In the tax form covering 2020; I am asked whether I have been trading with any digital asset during the year. I bought digital currency for fiat money in 2020 and I have not made any other digital currency transactions during the year. Should I answer the question in the form with “Yes”? ”
According to the Tax Office’s response dated March 2, people who received digital currency for fiat money throughout the year do not need to report this transaction on the form. According to Forbes’ example, someone who bought Bitcoin for $ 1,000 from a platform in 2020 does not have to give information about it to the IRS.
Sees cryptocurrencies as property
The IRS defines many cryptocurrencies like Bitcoin as property rather than currency. Citizens making cryptocurrency transactions can pay taxes on the difference between the purchase and sale price.
According to the example of Kathryn Hauer, a financial expert at Wilson David Investment Advisors, anyone who earns $ 10,000 by buying and selling bitcoins should report this as a gain. Speaking to CNBC, Hauer said.
“Things can get very complicated for someone trying to hide the money they earn from cryptocurrencies from the IRS.” she says.