As the tax season is coming close, countries worldwide are looking for a better tax structure. The U.S. Internal Revenue Service (IRS) focuses on crypto investors and its Form 1040.
The federal government requires investors to record taxable transactions involving digital assets. These transactions include crypto compensation, crypto mining prizes, and free coins. Although the IRS is not new to asking for information on crypto transactions this tax year, it is focusing more on digital currency brokers. This comes as Congress and President Biden’s government work to tighten down on tax evaders.
According to a report published by the United States Department of the Treasury, the crypto-currency-driven economy has contributed to the tax gap due to loose reporting rules related to tax evasion.
IRS joins regulators all over the world
When the IRS first questioned people about their digital currency transactions for the 2019 tax year, they focused on crypto. It was, however, only on a Schedule 1 form, which isn’t used by all taxpayers. Only a few types of income are reported on Schedule 1 forms, such as unemployment or rental income.
Not only the U.S., but many other countries, including South Korea, India, Australia, and Russia, are looking to impose a structured tax on crypto investors. Australia recently said that it could not rely on investors’ own reports related to tax.
The IRS back in 2020 placed the crypto on the 1040 form, which it stayed for this tax year. As per CNBC, the question changed to:
“At any time during 2021, did you receive, sell, exchange or otherwise dispose of any financial interest in any virtual currency?”
The new rules are meant to make it more difficult for crypto investors to hide their activity.