IRS broadens tax requirements for crypto to encompass everyone
The IRS said tax and reporting requirements are now mandatory for everyone who received, earned, transferred, or sold cryptocurrencies.
The International Revenue Service (IRS) has updated its taxation and reporting requirements and broadened its scope to everyone who “has dealt” with digital assets, according to a Forbes report.
All investors who received, earned, transferred, or sold digital assets in 2022 with the purpose of generating revenue are subject to the new requirements, as the Forbes article explains. The term “virtual currencies” was also changed to “digital assets.”
The document states:
“At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
Crypto gains earned from purchases held less than a year are subject to regular income tax, which varies between 10% to 37%.
On the other hand, individuals who held, transferred between their own wallets, or bought crypto with fiat currencies are not subject to the same taxation requirements. Revenue generated from digital assets held longer than a year is taxed between 0% to 20%, depending on the income level.
The new update also includes NFTs among the digital assets. Managing partner at CryptoTax International, Abhinav Soomaney, commented on the update and said that even though the Ethereum (ETH) transactions used to purchase NFTs are traceable and taxable, over-the-counter purchases are complicated to track.
To overcome this challenge, Soomaney said the company integrated an IT team that tracks the transfer of tokens from one wallet to another and lists them chronologically to identify manual purchases.