Cryptocurrency holders now know more about what the Internal Revenue Service expects to see on their tax returns, thanks to new guidance from the agency.The Internal Revenue Service has released a new set of laws on Wednesday, that tell virtual currency otherwise known as cryptocurrency investors and their tax advisers to report income from their holdings.
The IRS has also has ordered the taxpayers to track their crypto transactions to determine how much they owe when they sell their share. An investor must also document the transfer of coins between two accounts, which is known as wallets, to prove to the IRS that the transactions are tax-free.“It’s going to encourage people who weren’t in compliance to come into compliance,” stated James Creech, a tax lawyer in San Francisco.
This guidance applies long-standing tax rules, including a requirement that assets held for less than a year. Those held for longer qualify for the 23.8% preferential rates. This law is brought in, in order to maintain transparency rate and also to track the total number of cryptocurrency users.
There is a huge gap and difference between the number of crypto account holders and the number of tax forms filed reporting incomes is really staggering. This move by IRS will help the government to fill this void in this field.