beincrypto.com
Crypto tax evasion in the United States is about to become more difficult following the subtle change made by the Internal Revenue Service (IRS) to its form 1040.
America’s tax body continues to push for greater cryptocurrency tax compliance despite lingering confusion over some of its guidelines.
Plausible Deniability for Crypto Tax Evasion Out the Window
As Wall Street Journal (WSJ) reported on Sept. 25, the position of the “crypto question” on the IRS standard 1040 form now has a new “unmissable” position. A draft of the tax form published by WSJ shows the crypto query appearing immediately beneath the fields for name and address.
The new position of the crypto question appears to be a deliberate move by the IRS to prevent cases of taxpayers claiming ignorance of the existence of the question. Indeed, in its previous appearance in the 2019 form, the query appeared in an often-overlooked portion of the document.
By giving the crypto question a more prominent position on the tax form, the IRS is taking a page out of its playbook. Back in 2009, the IRS debuted a tax-return query about overseas bank accounts as part of a crackdown on tax evasion via offshore bank accounts.
As previously reported by BeInCrypto, the IRS continues to issue warnings against misrepresenting crypto holdings. In August, the tax office sent out another batch of warning letters to crypto owners in the country, further reiterating its focus on combating virtual currency tax evasion.
US Cryptocurrency Tax Laws Still Require Polishing
The IRS push for compliance aside, crypto taxation in the US still constitutes a “compliance nightmare” with several calls for a more streamlined set of guidelines. Back in August, the Congressional Blockchain Caucus called on the IRS to adopt a common-sense approach to taxing proof-of-stake.
The IRS for its part has also clarified certain matters related to the treatment of digital assets for tax purposes. In February, the tax agency stated that video game currencies like Fortnite’s V-bucks were not taxable assets.
A couple of bills currently before Congress also deal with the issue of crypto taxation. One of such bills — the Virtual Currency Tax Fairness Act — contains a provision for a de minimis tax exemption for crypto transactions below $200.