In a recent revelation, a renowned media house said that the International Revenue Service (IRS) has updated its taxation requirements and broadened its scope to everyone who “has dealt” with digital assets.
Sources reveal that all the investors who received, earned, transferred, or sold digital assets last year to generate revenue are subject to new requirements. The organization also changed the term “virtual currencies” to “digital assets.” As stated in the document:
At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?
The crypto gains earned from purchases made less than a year ago must adhere to regular income tax, which varies between 10% to 37%.
Notably for the individual investors who held, transferred between their wallets, or brought crypto with fiat currencies as they are not subject to the same taxation requirements. However, revenue generated from digital assets held for a period longer than a year is taxed between 0% to 20% depending on the income level.
It is also being said that the new update includes non-fungible tokens (NFTs) among digital assets. Abhinav Soomaney, the managing partner at CryptoTax International, commented on the update that even though the Ethereum (ETH) transactions used to purchase NFTs are traceable and taxable, over-the-counter purchases are complicated to track.
CryptoTax International is an India-based company helping individuals and companies meet their legal obligations arising from dealing with blockchain-based assets. To overcome the tracking challenge specified above, Soomaney said the company integrated an IT team that tracks the transfer of tokens from one wallet to another and lists them chronologically to identify manual purchases.
In January, Thomas Fattorusso, the special agent in charge of the IRS-New CI’s York field office, said that the IRS was hiring hundreds of new employees. Despite his opposition to the asset class, Fattorusso insisted that the IRS embrace technology rather than be antagonistic. A further point he made was the increase in legitimacy and sophistication of the asset class. To create a “symbiotic relationship,” he wants to work with crypto firms.
Last year, the IRS also published a report highlighting a trend wherein cryptocurrencies are being exchanged for fiat currencies, and people fail to report crypto payments. The agency also planned to build hundreds of crypto cases to be made public. The department’s investigation statistics currently contrast with the previous trend where most cases were of money laundering. In the past three years, the cases have been more in digital asset investigations.