The IRS has made an unpretentious, however, critical change in how the citizens should report digital currency taxes in their filings and tax returns. It is a welcome positive development, as it helps eliminate a portion of the disarray that the organization had recently made and limits the extent of what ought to be uncovered.
However, in the past IRS has received severe criticism over confusion regarding the efforts and steps to track taxpayer’s crypto-oriented activities. As a result, the organization’s current approach is far more appreciated. IRS, this time made all the necessary changes to its critical questions regarding the crypto traders.
In the 20201 drafts that were published, on July 22, 2021, IRS has made a swift however significant change to the phrasing of the suspicious virtual currency question which occurred up on the front of the 2020 government form inquiring “Whenever during 2020, did you get, sell, send, trade, or in any case, get any monetary premium in any virtual cash?”.
Law experts, public office holders, and the crypto community all agreed on the fact, that the previous wording of this question was extremely critical in nature. That is why IRS has received intense criticism. Critics build their argument “by putting such wording in the question, IRS tried to enforce its legal authority on people who would have answered that question.” It could have helped IRS to build an active database about customers.
It also raised serious concerns about how people should answer the question back in 2020. The updated draft is smaller in degree and traces that the IRS thinks, often about citizens with taxable cryptocurrency transactions, which would ordinarily happen, if the taxpayers stripped invested partially or all of its crypto-centric assets.
The question now appears as, “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in VC?”
The broader spectrum of the changes implemented by IRS shows that this year U.S state regulatory authorities have turnaround the financial and regulation laws regarding the crypto market. However, in the past tax provisions regarding crypto trading were disgusting. Authorities were criticized frequently. According to IRS head, Michael Desmond said that approximately a 150million U.S citizens file their tax returns annually. Around 7 to 11% of them are young adults with deep affiliation with the virtual and crypto market. As per these facts, IRS should receive at least 12 million tax returns, however, the actual amount falls far behind this mark. The whole scenario leads to only one conclusion “people were suspicious of answering the question appears on their tax documents,” he said. To accommodate those people IRS amended its question. Which has been welcomed by the crypto community.
