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Cryptocurrency News: IRS Starts to Keep a Closer Eye on Cryptocurrency

Key Takeaways IRS adds a new question about crypto to tax forms IRS aims to keep a more serious eye on cryptocurrency going forward New proposed bill called the ‘Cryptocurrency Act of 2020’ aims to answer some long awaited questions on how the United States will handle cryptocurrency

In the past, the IRS did not ask any question related to cryptocurrency on its tax forms. Now, in light of tax fraud and evasion made relatively easy using cryptocurrency, the IRS has decided to include this question on its forms. 

A report released this Monday by the IRS made the issue of crypto/virtual currency tax reporting more significant. In a section of this report, titled “Emerging Issues,” the IRS stated that they have “new and emerging compliance areas that require attention, including crypto/virtual currency.” 

The new question on form 1040 asks “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”

While the IRS has already offered some guidance on how to report taxes related to cryptocurrency, this new question marks a more serious tone that it is taking. Currently, the IRS considers any crypto holdings to be property rather than currency. This means that any gains or losses associated with a sale of crypto assets must be reported. Now, along with gain or loss reporting, it is also simply asking if people own any at all. 

The question raises a number of issues for cryptocurrency holders. Now that the IRS is asking the question it is able to prove intent if someone does not answer but does hold crypto. Austin Woodward, a CPA and the CEO of crypto tax software TaxBit, says “this new question is really unprecedented, in that 170 million taxpayers are now potentially going to have to answer that question.” He also said that “If you lie, now the IRS can prove intent, whereas before, pleading ignorance, you could kind of get away with it.”

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