- US crypto users will first time going to find cryptocurrency in the 2020 Form 1040
- Prioritizing the requirement for crypto-related information, the US tax authority has kept the question on the top so no one could miss
- IRS has plans to use the John Doe Summons as the part of cryptocurrency, which needs approval from the government
- Following the scenario, it seems like now the taxpayers will need qualified tax advisors
US crypto users should begin finding qualified tax advisors and follow their legitimate advice in this tax season. The fact will help the users transacting in cryptocurrency to protect them from penalties. Indeed, the Internal Revenue Service (IRS) has been observed aggressively pursuing taxes on digital assets transactions. Certainly, this year, a question has been added to the 2020 Form 1040 related to the crypto assets for the first time this year. The question confirms if the taxpayer has received, sold, sent, exchanged, or acquired virtual currency in 2020.
IRS has prioritized US crypto users to pay tax on transactions
In the 2020 Form 1040, it was observed that the first piece of information the IRS wants to know is about cryptocurrency. Notably, in 2019 the question was on Schedule 1 of the tax form. And this year, after the name and address, the users have to confirm whether they have purchased, sold, exchanged, or acquired cryptos last year.
Following the placement of the question, it seems that the tax authority wants the question not to be missed by the taxpayers. Indeed, now the 150 million taxpayers will have to answer that question. Hence, after gathering such information, the IRS will increase the revenue stream to the government from cryptocurrency transactions.
IRS’s cryptocurrency initiative is John Doe Summons
It is known that as part of digital assets, the US tax authority is planning to use the “John Doe Summons.” The tool is of concern for the taxpayers who may have virtual currency tax obligations and will impose a substantial burden on digital assets exchange. However, the tool requires approval by the federal district court judge. Simultaneously, the tax authority is pursuing authority to issue such instruments against crypto assets exchange. On the other side, the US government is asking regarding the taxpayers who conducted at least the equivalent of $20k in transactions.
Following the concerns related to the taxation issue, it seems the firms should now need tax advice. However, the tax authority has already demonstrated that it gathers factual information and will be pursuing those that do not comply with the rules.