Posted on 01/26/2023 6:38:26 PM PST by SeekAndFind
The Internal Revenue Service (IRS) issued an alert to taxpayers on Tuesday, reminding them that they must report all digital asset-related income and answer a new digital asset question on their 2022 federal income tax return or face consequences such as delayed refunds or even penalties.
The IRS said in a Jan. 24 release that a key change on 1040 forms this year is that the agency has replaced the term “virtual currency” with “digital assets,” in addition to some other modifications to the wording.
The “Yes” or “No” question, which was expanded and revised this year to update terminology, reads as follows:
“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 question appears at the top of tax forms 1040, Individual Income Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Income Tax Return.
“All taxpayers must answer the question regardless of whether they engaged in any transactions involving digital assets,” the agency cautioned.
It is a legal requirement to accurately report all income, including income from digital assets, on federal income tax returns. Failure to do so could result in non-compliance with tax laws and possible penalties.
The IRS has provided a detailed explanation of what constitutes a digital asset, which includes such things as stablecoins, non-fungible tokens (NFTs), and cryptocurrencies.
Taxpayers need to check the “Yes” box if they:
Those who tick the “Yes” box must also report all income related to their digital asset transactions on relevant forms. For instance, an investor who sold cryptocurrency during 2022 would use Form 8949, Sales and other Dispositions of Capital Assets.
Taxpayers should check the “No” box if they merely owned digital assets but didn’t engage in any transactions involving them in 2022.
They should also tick “No” if they merely transferred digital assets from one wallet or account they own or control to another one that they own or control, and if they bought digital assets using real currency like the U.S. dollar.
The IRS has warned that many taxpayers should expect a smaller refund this tax season because of tax law changes including the expiration of pandemic-related stimulus payments that would otherwise have boosted refund balances.
“Due to tax law changes such as the elimination of the Advance Child Tax Credit and no Recovery Rebate Credit this year to claim pandemic-related stimulus payments, many taxpayers may find their refunds somewhat lower this year,” the IRS said in a press release on Jan. 23, the day the agency began tax returns for 2022 earnings.
Not all tax filers will see lower refunds as individual circumstances vary; many will see smaller checks.
The Recovery Rebate Credit was a way for millions of Americans to receive pandemic support if they did not receive their full amount via stimulus checks.
This credit was available for missing amounts from the first, second, and third round stimulus checks, and could only be claimed on 2020 and 2021 tax returns.
The stimulus checks were discontinued in December 2021 and the missing third-round amounts could only be claimed on a 2021 tax return filed in 2022.
However, people who may have missed the opportunity to claim missing third-round stimulus payments can review their 2021 tax return and consider filing an amended return.
The Child Tax Credit (CTC) for 2022 tax returns has been reduced to $2,000 per child, down from the expanded amount of $3,600 for children under 6 and $3,000 for children between 6 and 17 in 2021.
Some taxpayers may be eligible for an Additional Child Tax Credit (ACTC), which would allow them to receive up to $1,500 of the CTC as a refund on their tax return.
Also, a tax credit that working parents can use to help cover child care costs or that people with adult dependents can use for the same purpose is lower in 2022.
Read more here...
(cryptocurrency)
Glad I never owned any.
The digital Currency is about here I think - what with a test by the Fed already done. ✅✅✅
Amen to that.
Is a CAR that you won from a raffle ticket?
Good point!
So, anything (goods, services) to which a price-tag can be attached and/or which is generally available - for a fee - in commercial transactions, can be viewed as "income-equivalent."
Would that include "services" performed in the context of "wifely duties?"
Regards,
I think he can always file a tax return for years he had income. There would still be penalties and interest.
Best talk to someone that does it for a living like HRB and such. At least for advice.
I do too. This year I precalculated my taxes so I owe a few dollars. Do not have to wait for it to get processed for months like last year. Yesterday really set me off, got a notice for our buddies at IRS that the interest I got on my delayed refund last year was income. Oh well, $2 I owe them.
I get what you’re saying there too.
It’s voluntary though. I’m not breaking laws.
I’m not committing tax fraud.
Tax fraud is illegal. Lying on your taxes is illegal.
“What is a digital asset?“
Seems to me that if you buy a song from iTunes.. THAT is a “digital asset”.
Or a movie from a streaming service…
This means just about EVERYBODY.
What’s fun about this is that it is possible to gift some kinds of digital assets to people whether they like it or not even if they’ve never signed up for an account or wallet (just as you can slip cash under the door at their house). Politicians who have railed against cryptocurrency, bankers and such who have done the same, have commonly gotten gifts of ethereum and other crypto in response. By rights, they should have to answer this question correctly and admit what they’ve received or face consequences. (Note that the gifts are traceable with blockchain technology, so anyone can report them if they answer wrongly.)
I interviewed for a job managing a crypto server farm, place had 200 servers mining away and owner told me his power bill was over 100k year...After meeting the main owner I decided we were not a good fit.
I wouldn’t post that
Another thing they did was to eliminate the deduction for charitable donations for taxpayers who don’t itemize. Monetarily not a huge deal since the deduction was limited to a few hundred, but annoying nonetheless.
THIS is the SAME FED GOV’MT that wants to change us ALL over to Digital money???
They want to know ALL your CRYPTO activity.
Think about how many politicians this might trap.
They better not try to tax my tulip bulbs!
And that’s not the half of it. If somebody purchases a digital asset, such as bitcoin, it is treated as property for capital gain/loss purposes by the IRS. So, let’s say you buy a bitcoin in January 2021 for $15,000, then sell it in April 2022 for $20,000, you would have to treat the sale as a long term capital gain (held more than 1 year, basis is $15,000, sale is $20,000, gain of $5,000). That would necessitate the taxpayer filling out a Schedule D and Form 8949 and attaching them to their return.
THAT cannot be legal.
HIPPA laws should apply.
BANKS have ALWAYS reported interest income.
Joke’s on them... nobody actually made any income from a ‘digital asset’ in 2022.
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