US IRS Introduces Broad Category for Digital Assets Ahead of Tax Season
Godfrey Benjamin Oct 19, 2022 18:00
The US IRS has created the Digital Assets categories ahead of this year's tax season
The United States Internal Revenue Service (IRS) is preparing for the forthcoming tax season, especially as it concerns digital assets.
According to a draft bill published by the tax regulator, investors in the US will be able to see if and how they are supposed to report their digital assets which include crypto coins and Non-Fungible Tokens (NFTs).
The 2022 draft IRS Tax forms have created a new category dubbed “Digital Assets” for the different categorizations of assets that are tied to the emerging blockchain industry. To give a more emphatic and clear picture of the obligations it places on taxpayers, the IRS defined Digital Assets as;
“..any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins.”
In order to avoid any gray areas, the IRS stated that any digital asset that behaves in similarity to these assets per this definition will be treated as such.
The regulator stated some set of conditions under which Americans will need to give affirmations based on their crypto holdings. Per the draft bill, anyone who has received payment in cryptocurrencies over the past year received or gifted the assets categorized as digital assets amongst other conditions will have to properly report these items.
Taxing crypto gains is a very volatile subject of discourse in the global ecosystem, and based on their cryptographic nature, the government believes more people choose to hide their crypto transactions in a bid to evade taxes.
The IRS has been exploring quite a number of tailored solutions that can enable them to monitor crypto transactions in a bid to make everyone accountable. Besides working with exchanges to get necessary data on request, other private service providers are also helping the IRS develop tools that can aid its crypto tax goals.
