US residents do not need to report the purchase of cryptocurrency on the first page of the Form 1040 declaration if they adhere to the Buy Hold strategy . This follows from the information on the updated Frequently Asked Questions page of the IRS website.
Last year, the IRS submitted a draft declaration, where the question to the taxpayer was raised in the following format:
“During 2020, did you receive, sell, send, exchange or otherwise obtain a material interest in any of the virtual currencies?”.
Then many market experts criticized the new rules.
“Asking the IRS to declare all cryptoassets is just as inappropriate as asking for all email addresses, social media accounts or service plans ,” wrote Justin Wales, co-chairman of Blockchain and Digital Currency Practice.
Even if you think BTC is the only true coin, the fact is other projects utilize other chains that need a coin to operate. IRS asking US residents to declare all crypto is as inappropriate as asking citizens to declare all email addresses, social media handles, or data plans.
– Justin Winston Ono Wales (@WinstonOnoWales) August 20, 2020
Some tax management specialists expressed the opinion that these rules need further clarification.
Only at the beginning of 2021, the department explained that a simple purchase of a cryptocurrency with the subsequent storage of a virtual currency does not need to be reflected in the declaration.
According to the IRS, a taxable event occurs when a crypto asset is sold.
“When you sell virtual currency, you need to determine the capital gain or loss from the transaction ,” says the IRS website.
