VIRTUAL CURRENCY AND YOUR TAX RETURNS
April 19, 2022 - Douglas Myser
Virtual currency and your tax returns. When Covid hit and government spending went up, new sources of revenue were looked at by officials in government, to stem the deficit tide, and when the returns on Cryptocurrency went thru the roof, it drew attention to itself. Sen. Elizabeth Warren, and others started discussing regulating and then taxing the asset class. To first do that they needed to determine who owned it. So they started in 2020 with IRS tax forms, and had people state whether they owned any of that asset class or not. To lie on that form is a very serious offense. When they started to build up a database of those owned the asset, the clock started ticking down to them regulating it and then eventually taxing it. The 2021 Forms 1040 and 1040-SR ask whether at any time during 2021, a person received, sold, exchanged or otherwise disposed of any financial interest in any virtual currency. Taxpayers should not leave this field blank but mark it yes or no. Virtual currency and your tax returns.
The questions asked on the 2021 versus the 2020 form are more numerous. Underreporting income may lead to penalties and interest. Organized tax records help avoid errors that lead to processing delays and may also help to find overlooked deductions or credits. Taxpayers should have all their income documents on hand before starting their tax return. The IRS is seeing situations where people are not including unemployment compensation they received in2021 on their tax return. Although a special law allowed taxpayers to exclude unemployment compensation from taxes for 2020, it was oy for that year.
IF you need tax preparation, give us a call. If you have a tax debt, let us to determine your Tax Relief options in the IRS code, like the IRS Fresh Start Program. We are the Fourth Oldest Tax Resolution Company in America.