The United States Internal Revenue Service (IRS) has offered clarification on the rules around declaring digital currency activity in new guidance published this week, ahead of publishing its new draft 1040 federal income tax form. The tax authority issued the guidance around which individuals should declare cryptocurrency activity to them. After previously revealing it, they would begin asking taxpayers to say whether they had “acquire[d] any financial interest in any virtual currency.” Taxpayers will be expected to tick “yes” on the form if they have received any free digital currency, whether by hard forks or airdrops or through any other means.
IRS clarifies who needs to declare crypto holdings.
The Internal Revenue Service’s draft form and guidance are expected to be rolled out in the current form, pending any new legislation in the interim or any “unexpected issues” that arise over the coming months. The IRS clarification will be broadly welcomed by those dealing in digital currency in the United States, after coming in for extensive criticism for its lack of guidance on taxpayers’ expectations. The IRS clarified there is no need to declare crypto interests where taxpayers simply hold Bitcoin in wallets through the tax year, or where they simply move digital currency from one wallet to another during the period.
Crypto regulations remain in a grey area in most countries.
Cryptocurrency regulations remain a hot topic in the crypto community as lawmakers around the world try to tackle the newly emerging space. Currently, crypto regulations in most countries are in a grey area. However, lawmakers and financial regulators are working to ensure decisions are made for the public interest. Since Facebook announced its cryptocurrency Libra last year, lawmakers around the world have started to take the crypto industry more seriously. Central banks in several countries are currently experimenting with their own CBDCs.