Digital Asset Income: IRS Enforces Reporting
Taxpayers Must Answer Digital Asset Question
The Internal Revenue Service (IRS) has issued a reminder to taxpayers that they must answer a digital asset question on their tax returns and report all income related to digital assets.
Income from Digital Assets Subject to Taxation
Income earned from transactions involving digital assets, such as cryptocurrency and non-fungible tokens (NFTs), is taxable. This includes income from buying, selling, trading, or mining digital assets.
Reporting Requirements
Any income from digital asset transactions must be reported on federal tax returns. This includes income that may have been received from platforms such as Coinbase.
Information Returns Form 1099-B
Under the legislation, an information return Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, must be filed with the IRS by parties facilitating the transactions.
Coinbase Form 1099-K
Some exchanges, like Coinbase, will send certain U.S. users Form 1099-K if they have received at least $20,000 in cash for sales of cryptocurrency related to at least 200 transactions in a year.
Conclusion
The IRS is taking steps to ensure that taxpayers are reporting all income from digital assets. Taxpayers are responsible for accurately reporting this income on their tax returns and may face penalties for failing to do so.
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