New Reporting Guidelines for Digital Assets are Published by the US IRS

The US Internal Revenue Service (IRS) has modified its reporting requirements for digital assets and clarified the taxation of stablecoins and non-fungible tokens (NFTs).

Cryptocurrencies, stablecoins, and NFTs are all considered “digital assets” for tax purposes in the IRS’ draft tax year 2022 guidance.

It claimed that digital assets include virtual currencies like cryptocurrencies and stablecoins as well as NFTs. For federal income tax purposes, a specific asset will be recognized as one if it possesses certain features of a digital asset.

The last clause seems to provide open for this category to potentially cover any future breakthroughs in the cryptosphere.

While the 2021 guide did not specifically address stablecoins and NFTs, it did utilize the term “virtual currency.”

NFTs, however, will not be subject to the same taxes as art under this draft because it is not thus defined. Instead of being considered a collectible, it is recognized as an asset. For instance, a capital gains tax, which is typically 28% in the US, must be paid when an artwork is sold. Depending on the number of variables, this can be anywhere from 0% and 45% for cryptocurrency.

The draft guidance noted that all taxpayers must respond to the question about digital assets, encouraging people not to leave this field empty and stating that, all taxpayers, not simply those who participated in a transaction involving digital assets, are required to respond to the question.

The taxpayers must check the box next to “Yes” if, in 2022, they: disposed of digital assets in exchange for goods or services, or in exchange for another digital asset; sold a digital asset; transferred a digital asset for free as a legitimate gift; or otherwise disposed of any other financial interest in a digital asset; received digital assets as payment for goods or services provided, or as the result of a reward or award, hard fork, mining, staking, or similar activities.

In general, it is not necessary to select “yes” for storing a digital asset in a wallet or account; moving a digital asset across wallets or accounts that one person owns or manages; using the US or other “real currency,” including through services like PayPal and Venmo, to buy digital assets

The text continues to refer to fiat as “real currency” when contrasting it with digital assets.

Meanwhile, in September, a US district judge gave the IRS permission to go after people who try to evade paying taxes on their cryptocurrency transactions. The directive was issued at a time when the usage of digital assets was on the rise, which led to an increase in the number of cryptocurrency tax evaders.

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