Crypto investors in the US are finding themselves in difficult tax situations, with many of them still reeling from last year’s market downturn and multiple bankruptcies.
For this year’s taxes, the Internal Revenue Service (IRS) has made adjustments to its income tax forms to be more clear about what counts as crypto holdings with the filing. The Directive is now using the term “digital asset”. to clarify that the asset is preferred instead of “virtual currency” nftThe latest version of Bloomberg Crypto also needs to be reported newsletter Said.
The change reportedly came after taxpayers were unsure if NFTs needed to be reported.
In addition to the new terms to be used, the 2022 tax form further elaborates on a crypto-related question that asks whether crypto was received as a “reward, prize or compensation.”
part of the change in that question is 2021 Infrastructure BillThat further tightened crypto reporting requirements, the newspaper said.
Taxes for 2022 in the US are due from next week itself.
Companies can start reporting customer transactions
Although the requirements have already been tightened, there is much more to come in the near future.
Among other things, the US Treasury Department is expected to issue new regulations for crypto service providers, requiring them to turn over records of customer transactions to the IRS.
The rules were due to take effect in January but were postponed until the text was finalised.
tax loss harvesting
Like every year, crypto investors who are sitting on losses can make use of a popular technique known as tax loss harvesting To deduct up to $3,000 of the loss against their income each year.
The technique involves selling an asset at a loss before the end of the tax year, and then buying back the same asset sooner rather than later to realize the loss.
Still, some investors may have even bigger problems to deal with than the many bankruptcies seen among crypto companies last year. The most notable of these, perhaps, was ftx collapseIn which billions of dollars of investors are still stuck.
Crypto owners whose holdings are stuck in bankrupt companies are apparently unable to sell their assets to realize any losses.
And to make matters worse, some of these crypto owners may still be liable to pay taxes on interest earned on their crypto in 2022, for example through interest-earning crypto accounts such as Now-Bankrupt Crypto Lender Celsius,