Saturday, September 26, 2020

The IRS Is Setting a Trap for Cryptocurrency Tax Dodgers

Cryptocurrency holders, beware: A surprising change to your 2020 tax form is about to strip away excuses for ignoring the tax rules on bitcoin, ether or other digital currencies, reports Laura Saunders at The Wall Street Journal.

The Internal Revenue Service plans to alter the standard 1040 form by putting this question on the front page: At any time during 2020, did you sell, receive, send, exchange or otherwise acquire any financial interest in any virtual currency? The taxpayer must check the box “Yes” or “No.”

The crypto question first appeared on the 2019 tax form, but on a part of the return that not all filers had to answer. Now it’s moving to the 1040’s most prominent spot, just below the taxpayer’s name and address.

“This placement is unprecedented and will make it easier for the IRS to win cases against taxpayers who check ‘No’ when they should check ‘Yes,’” says Ed Zollars, a CPA with Kaplan Financial Education who updates tax professionals on legal developments, according to Saunders.

Saunders notes that in two recent nontax criminal cases—one involving theft by North Korea and the other involving the sale of child pornography by a Dutch national—the IRS provided key assistance because of its growing expertise in cryptocurrencies.


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