Last year saw a lot of decisions in the crypto tax space. The IRS updated its crypto tax regulations. South Korea made its stance on what’s taxable and what isn’t (although the country still has a lot to clarify). India warned people in the crypto space to pay their taxes. Crypto taxation in 2020 is going to be similar with more authorities getting involved.
Throughout 2020, a lot will happen as well. There’s going to be updates on crypto regulations from countries such as the United States, UK, and many others that are taking steps to somehow regulate the industry. Here’s how crypto taxation in 2020 would look like.
Crypto taxation in 2020 – The United States
We’ve already got a feel of how 2020 would look like for crypto traders and investors in the US when it comes to taxation.
Tax question on IRS form
At the last part of 2019, the IRS announced plans to pose questions to American taxpayers about their activities with cryptocurrencies. These questions will appear on the 2020 Schedule 1 tax forms and will seek to gather more information about people engaged in crypto trading and investment.
Building on previous moves by the IRS, this is the beginning of its crypto regulation journey. This step will allow them to profile all the taxpayers as cryptocurrency holders and not, which will help in the future to pursue for their gains and income reports.
Build awareness on crypto taxation
These questions from the IRS will help them know more about the people in the crypto space. Beyond this, it will help investors and traders to understand the basics of crypto taxation and the most important factors needed to file one’s crypto taxes.
This could also mean more bills before Congress in 2020. However, this doesn’t mean authorities will have a full grasp of the space. Thus, any tax regulation on crypto activities might cause more harm than good.
Planning and regulation
Gathering information on crypto activities will see the IRS lean more into planning and designing more regulatory frameworks in 2020. The institution would use this data to focus more on understanding the ins and outs of crypto trading, their tax implications, and how to go about it.
Income declaration on tax returns
With recent IRS guidance, there is a huge push on classifying various types of income generated from cryptocurrency activity. We understand that staff of IRS has more cryptocurrency savvy professionals who understands complex jargon like airdrops, hard forks, staking, mining and more.
The guidance clearly mentions what kind of cost-basis has to be considered for different types of cases. This brings a necessity to understand what kind of cryptocurrency is coming into your account or wallet and classify them appropriately.
BearTax provides you ways to review and assign proper reasons for each of your incoming transactions (don’t worry, you don’t need to do all incoming deposits – only those that weren’t transfers – the system is smart enough to detect and reduce work for you).
Compliance push for small businesses
Last year, IRS has sent out notices to cryptocurrency traders who either misreported or underreported their gains or losses. These were called as the Letter 6174/6174-A and notices CP2000 and CP2501. These were targeted at individuals who are dealing with cryptocurrency.
In 2020, the focus could be turned to small businesses accepting cryptocurrency and many more services accepting crypto. This will definitely increase the necessity for bookkeeping platforms who can understand crypto transactions and integrate with popular tax software seamlessly. With the lack of such platforms, it is very important for businesses to keep proper records in USD and cryptocurrency along with wallet/account addresses properly.
Regulatory push for Exchanges
Apart from individuals and businesses accepting crypto, the other major focus could be the exchanges themselves. Exchanges are those entities or venues that provide services for customers of exchanging the cryptocurrency – or in normal words trading cryptocurrency.
These exchanges are now complying with Financial laws by getting proper licenses to operate in the US. However, there’s another part of it where they should be complying with laws by providing proper tax reports to their customers. There could be a serious push from the IRS on this front.
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Crypto Taxation in Europe
We can say that the European region is among the crypto-havens when it comes to taxation. Apart from the United Kingdom, which classifies crypto as an asset or private money, much of Europe hasn’t got a firm grip on these crypto assets.
For instance, some crypto tax haven countries are in Europe. This isn’t about countries where crypto hasn’t been talked about before. But rather nations who have made some measures concerning digital currencies. Germany, Belarus, Portugal, Malta, Switzerland, and Slovenia all have exempted crypto from certain tax brackets, including VAT and personal income taxes depending on the jurisdiction.
Crypto taxation in 2020 in the European region is going to see more of tax guidance from authorities. Some countries in Europe still needs to define cryptocurrencies, what they consider taxable or non-taxable crypto events, and the business atmosphere for these digital assets.
Some countries already started this crypto tax guidelines journey last year. For instance, the Netherlands, Italy, Sweden, and Belgium all have guidelines on cryptocurrencies – with taxable and non-taxable disclosures on basic crypto transactions.
And we might see countries like France and the UK, who already have a grip on crypto taxation, to broaden their scope of including more taxable events to crypto activities.
Crypto taxation in the Asian continent
Asia is huge – some countries have made huge moves on cryptocurrencies, others haven’t done anything yet. When it comes to crypto taxation, countries in the region haven’t done much. In 2020 and beyond, India, South Korea, China, and Thailand are specific countries to look out for in crypto taxation.
For the other countries, we may not see much in crypto taxation in 2020. Singapore made it known last year that it’s going to remove goods and services tax (GST) from crypto transactions that serve as a medium of exchange.
Beyond countries in Asia that are exempting or trying to put taxes on crypto, some major crypto tax moves in 2020 maybe Iran, the Philippines, and the United Arab Emirates among others.
Africa 2020 crypto taxation outlook
Informally, and by default, cryptocurrencies aren’t taxed in Africa. This isn’t just attributed to the difficulty of tracking crypto transactions or the new nature of cryptocurrency as an asset or financial instrument.
The issue is, taxation, especially in the informal sector in many African countries isn’t well developed. This makes it difficult for sole proprietors and small businesses to pay tax. Also, it makes tax evasion easy. While a few countries such as Nigeria, South Africa, Zimbabwe, Ghana, and Uganda have shown their interest in this field, there’s no sign that there would be talks of taxing crypto activities on the continent anytime soon.