Increased IRS Enforcement on Crypto & What It Means for You

Increased IRS Enforcement on Crypto & What It Means for You
Increased IRS Enforcement on Crypto & What It Means for You

According to a recently posted Wall Street Journal report, the IRS is gearing up to deploy a change to the 2020 tax form that directly affects crypto investors. By now, it is no secret that there is an ongoing plan for increased IRS enforcement on crypto.

For context, 2019 was the first time the IRS asked if an individual had participated in buying, selling, or holding digital assets by putting the question on the Schedule 1 form — not necessarily requiring an answer. But fast-forward just 1 year later, and the IRS has chosen to highlight the question on the first page and place it above the fold on the Standard 1040 tax form. In changing the positioning of the question, the IRS is now requiring an answer to this question.

“At any time during 2020, did you sell, receive, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

You must either check “Yes” or “No”.

ZenLedger’s Chief Operating Officer, Dan Hannum, gave an interview for the WSJ report and was asked how many taxpayers he thought actually checked the crypto box on the 2019 form. “I think fewer than 150,000 crypto owners filed required tax forms for 2017, 2018, and 2019, based on my current knowledge.” This number will obviously increase next year, as global users holding crypto assets now top over 100,000,000.

So, what does this mean for you?

The IRS is getting much more serious about compliance and all crypto gains, losses, and even passive income from staking or interest-bearing wallets should be reported on your taxes in 2020. Even if you have multiple exchanges and wallets spread across various platforms, you’ll need to gather all of your transactions and report on them.

To hear the specifics steps you should be taking to ensure you’re accurately reporting crypto transactions on your tax returns, check out our latest ZenLedger on-demand webinar here.

Thankfully, ZenLedger can help you easily file your taxes with our crypto tax software as we offer integration with all major players and full DeFi support. We can even help you amend previous tax year forms! The best part: ZenLedger has live support available daily via online chat, email, phone/text, or by appointment — we want to help you succeed in navigating these waters.

There is no doubt that there will be increased IRS enforcement on crypto taxes in 2020, but with ZenLedger and our crypto tax calculator and experienced team, we can help take away the stress and simplify the complicated bits. Reach out to discuss!

IRS Form Samples:

2019 Schedule 1 Form — https://www.irs.gov/pub/irs-pdf/f1040s1.pdf

2020 Sample 1040 Form — https://www.irs.gov/pub/irs-dft/f1040-dft.pdf

Originally published at https://zenledger.io on October 7, 2020.

Simplifying DeFi and cryptocurrency taxes for investors & tax professionals. www.zenledger.io

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