Cryptocurrency has been a major topic in the world of finance for the past several years and is only becoming more popular among a number of individuals and corporations today. You may recognize the names Bitcoin, Litecoin, Etherum, and Dodgecoin – all forms of cryptocurrencies that have seemingly gained a significant amount of mainstream interest over the past couple years specifically.
Some may argue that one of the biggest appeals of using cryptocurrencies is being able to remain anonymous through private and secure transactions. However, this will no longer be the case after December 31st, 2022.
Various factors in the world of crypto are evolving quickly, including tax rules. Similar to any investment, there are taxes to take into consideration before determining how much you really made, or lost, on digital credits.
New Reporting Requirements for Cryptocurrency
As of now, those who are involved with cryptocurrency are responsible for keeping a record of all their transactions – including reporting the taxable transactions to the IRS. Crypto users are asked to indicate whether they received, sold, sent, exchanged, or otherwise acquired any financial gains in any virtual currency during the tax year at the top of their 1040 tax form.
Beginning in 2023’s tax year, all potentially taxable digital asset transactions made by cryptocurrency users will be reported to the IRS by outside parties. This is incredibly similar to the third-party reporting that is required when you hold or invest in stocks. Essentially, both you and the agency will get a W-2 form from your employer that reports your annual earnings and a Form 1099 from your broker that reports any stock transactions. In addition, next year businesses must begin reporting whenever they receive more than $10,000 of cryptocurrency in a single transaction in efforts to minimize money laundering.
Crypto Transactions Will No Longer Be Anonymous
While the news that cryptocurrency is here to stay may be great for some, the loss of anonymity also presents an obstacle for those who wish to keep their transactions private, or for those who have not met their tax obligations. Furthermore, until this year it was fairly common to be able to open a digital wallet by simply using a name and email address. Come 2023, it is expected that users will now be asked to provide an array of personal information that was likely not asked in the past.
We understand that a number of our clients at Brock CPA may use cryptocurrency platforms for their business or individually. With a number of new changes on the rise for the world of crypto next year, you can rely on our accounting and tax planning professionals to act as knowledgeable guides and help you navigate through any uncertainty. As always, we encourage you to reach out with any questions or concerns regarding your accounting and tax needs by calling 904-330-0268 or emailing firstname.lastname@example.org.