P Xenos and M Bacina
IRS now requires taxpayers to disclose crypto activities
The U.S. Internal Revenue Service (IRS) has finalized and put in use a new tax form that requires crypto owners to declare whether they have received, bought, sold, exchanged, or acquired any cryptocurrencies in 2019.
The Schedule 1 form is part of the 1040 tax form for U.S. taxpayers to declare “Additional Income and Adjustments to Income.”
The form is now finalized and posted on the IRS website, ready for use in filing 2019 tax returns. Form 1040 is used by over 152 million U.S. tax filers. The first question on the new Schedule 1 reads:
At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? See snapshot of the Form below
Jeffrey Levine, a Certified Public Accountant and director of monetary preparation at Blueprint Wealth Alliance in New York, remains concerned at the continued vagueness of the IRS by stating that:
The most significant thing is that the IRS is asking this for a factor, and my concern is just how much have you increased your audit threat by inspecting ‘Yes’ in reaction?
Although it remains to be seen what is the exact effect of pressing 'Yes', this does fall consistent with the IRS' promise of increased its efforts to discover and tax crypto owners.
This comes after the IRS released guidance last month informing virtual currency investors and their tax advisers how the agency expects them to report income from their holdings.
Without budget numbers it was unclear what the "cost to catch" for each offender has been. So far only "dozens" of offenders had been identified, raising the real question of whether unlawful tax behaviour is present in cryptocurrency transactions in significant amounts.