IRS Updates Crypto-Related Instructions for 2022 Tax Filing – Last week, the Internal Revenue Service (IRS) released draft instructions for tax form 1040 for 2022. Form 1040 is used to file individual income tax returns in the United States. The new instructions contain a number of cryptocurrency-related changes.
Digital Assets has replaced the section titled “Virtual Currency.” The IRS stipulated: “Digital assets are 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.”
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In contrast, neither NFTs nor stablecoins were mentioned in the 2021 1040 instructions. In accordance with the instructions, taxpayers must check the “Yes” box next to the question on digital assets on page 1 of form 1040 if they “received (as a reward, award, or payment for property or services)” or “sold, exchanged, gifted, or otherwise disposed of a digital asset (or any financial interest in a digital asset)” at any time during 2022.
The 1040 draft tax form for the year 2022 was released in August. Matt Metras, an enrolled agent and cryptocurrency tax specialist at MDM Financial Services in Rochester, New York, was quoted by CNBC as saying Monday: “I think that’s a good change. People who trade things like NFTs would not think of that as a virtual currency.”
He added that the “broader language” of the IRS could include new categories, such as taxpayers receiving digital assets from “play-to-earn” games. Metras noted, “The IRS is always going to be behind the eight ball because they just can’t keep up with how fast the crypto space is changing.”
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Bloomberg cited Miles Fuller, head of government solutions at Taxbit and former senior counsel in the IRS Office of Chief Counsel, as saying, “The IRS is ramping up by coalescing their terminology around this digital asset term.” “So it means that it’s more likely than not in the near future, we’re gonna see those regs come out and the IRS continuing to move forward with sort of implementation of a regulatory regime,” he opined. “Probably sooner rather than later.”
