April 17, 2024

Digital Assets Get New IRS Category As Tax Year Closes In

There has been a release of an early draft of the Internal Revenue Service tax form. It has stablecoins, NFTs, and cryptocurrencies under a new category of digital assets.

New Categories for Clearer Tax

Taxpayers in the US will now see a wider and more specific categorization of assets. Their IRS tax form for this year will introduce more definitions. The draft features properly defined Digital Asset segments that show how taxpayers will pay for using cryptocurrencies, NFTs, and stablecoins.

Digital Assets are defined on the 16th page of the draft as any digital representation of value. It would be recorded on a cryptographically secured decentralized ledger or similar technologies. 

The tax form in 2021 requested taxpayers to declare their involvement with cryptocurrencies. Either they sold it, received it, or exchanged it. The term is changing in the coming 2022 tax form.

Taxpayers will be required to provide an answer if they have engaged digital assets in the year. The question is contained in a separate section of the Digital Assets tax form.

There are a number of conditions that would necessitate taxpayers to answer “yes” to the question on Digital Assets. It includes accepting rewards, payments for any service or property, or gifts.

Clearing All Assets

This will also include situations where an individual gets digital assets for any reason at all. Receiving digital assets through staking or mining equally fall under this category. The same goes for transacting digital assets to get goods or services.

Holding stablecoins, cryptocurrencies, or NFTs is clearly addressed. Staking is also sufficiently addressed. 

The document says a person has a financial interest in digital assets if they own a digital asset. Or if they have a stake in an account that contains any digital assets. Or if such accounts have the obligation and right to acquire the financial interest.

A person who also has a wallet that holds digital assets is under that category. The document equally outlined conditions that except taxpayers from answering “yes.” If the taxpayer has a digital asset in an account or transfers it to another account using the US Dollar through electronic means such as PayPal.

Digital assets can be categorized as either income sections or capital gains of the tax form. Any individual that sold their capital asset during the year should calculate it in Schedule D.

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