IRS has provided updated guidance today. This is the first update in 5 years. We went through it and summarized it for you.
What does it have for traders?
The updated guidance from IRS suggests that it is staffed with knowledgeable persons who understand the jargon better when it comes to the ledgers, on-chain vs off-chain transactions, airdrops, etc., This is a good sign as the upcoming regulations will be very informed in nature and would help increase the adoption among the masses.
BearTax, as a cryptocurrency tax software firm, these updated guidelines are in line with our existing practices. Also, we can help traders better by providing appropriate tools to calculate income, gains, losses and report them appropriately.
Some of the key points that were confirmed in today’s FAQs provided with IRS guidance on cryptocurrency.
- Specific identification while defining gain/loss is allowed – else, FIFO should be the way to go.
- More emphasis on fair market value (FMV) based on the timestamp of the transactions.
- “Crypto to Crypto” or “Exchanging Crypto for goods/services” is a taxable event.
- Cost basis includes fees, commissions and other acquisition costs in U.S. dollars.
- Paid in crypto is considered income and should be reported as income by FMV of crypto on that date.
- Paying for services or goods using crypto results in a capital gain or loss.
- No income needs to be reported in case you don’t receive a new coin after a hard fork.
- The value of a new coin (if received) will be the FMV at the time of the issue.
- If the coin you own has no published value, then value = value of goods/services exchanged
- No tax implications when a soft fork happens.
Gifts related information
- To calculate gain, the purchase price of a gifted coin is donors basis+gift tax
- If it’s a loss, the purchase price will be lesser of the donor’s basis or the fair market value.
Documents needed by IRS
As per IRS answers, you must report ordinary income from virtual currency on Form 1040, U.S. Individual Tax Return, Form 1040-SS, Form 1040-NR, or Form 1040, Schedule 1, Additional Income and Adjustments to Income (PDF), as applicable.
Autogenerate the necessary documents
What if we say, you can generate these documents without any additional effort?
Yes! You can with BearTax.
If you have traded cryptocurrency and would like to comply with the guidelines, import all your transactions to BearTax and generate your tax documents within minutes. Let the bear take care of all the cost-basis, proceeds and other hard calculations.
Export the documents to PDF or TurboTax and file your taxes. Signup now and get 10% discount using BITCOIN10 here.