The US Internal Revenue Service (IRS) has updated its FAQ section to offer regulatory clarity and guidance to investors interested in making a leap into the crypto space.
As of this year, the IRS will want to know if respondents have “received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency” with the information now a standard question on US Individual Income Tax Return forms, or Form 1040.
However, the FAQs also clarify that: “If your only transactions involving virtual currency during 2020 were purchases of virtual currency with real currency, you are not required to answer yes to the Form 1040 question.”
So, what do you need to do to figure out your tax form this year? Based on the FAQ, any crypto currencies purchased for US dollars that were not crypto-to-crypto trades or sold for FIAT do not have to be reported.
On the other hand, if an individual bought cryptocurrencies with other crypto assets or sold any of their crypto assets, they would need to report those. So there is still a little confusion.
For example, the FAQ misses out on citing crypto casinos. Winnings from regular casinos are usually taxable income, but are crypto winnings? Gaming websites such as Bitcasino, 1xBit and FortuneJack cater to hundreds of thousands of fans, if not millions. More clarity would be welcome.