Digital currency evolves in the eyes of IRS

Digital currency evolves in the eyes of IRS

The days of digital currency being used in unmarked trades that result in profit or loss are over–and that’s not a bad thing. Last week, the IRS updated its 1040 form to include this question at the top of page one “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” 

Although the IRS asked the question in 2019 on their schedule 1 form (1040-a), fewer people file a schedule 1 than they do a 1040. That being said, by moving the question to the 1040 form, the question will be seen—and answered—by more people.

Why did they update the tax form?

Ever since 2017’s “crypto-mania” the IRS has been trying to track down digital currency traders and make sure that they are reporting their profit/loss from digital currency trading during tax season. The IRS has sent numerous batches of letters warning digital currency traders that they have either not reported or under-reported their profits/losses from their trading activities. 

But now, with the addition of the digital currency question on the 1040 form, you are legally binding yourself to the ‘yes’ or ‘no’ answer you markdown on the page; which means that if the IRS discovers that you really have not reported or under-reported your profits and losses from trading digital currency, they will have evidence that holds up in court.

This is good for digital currency industry

The fact that the IRS has moved their question about digital currency from the last page of their schedule 1 form to the very top of their 1040 form is significant. This legitimizes the digital currency industry and indicates that the industry is exiting its infancy and is being recognized by the biggest government agencies in the world. It’s a good thing that the government is holding individuals accountable for their actions because that is something that they do for every major industry.

The latest update to the IRS’s 1040 form is a big step forward for the digital currency industry; and considering the attention that the digital currency industries have been getting as of late, it may just signify the beginning of an even larger growth period for the digital currency space.

See also: CoinGeek Live panel on the Regulation of Digital Assets & Digital Asset Businesses

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.

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