Tuesday October 18, 2022 – We have previously reported on the Internal Revenue Service (IRS) switching terms from Virtual Currency to Digital Assets. Today, the IRS clarified how to report Digital Assets on their 1040 income tax forms – setting up additional regulations very soon.
Further, the IRS defined Digital Assets to include:
• Virtual currencies such as Bitcoin and Ether
• Stablecoins such as Tether and USD Coin (USDC)
• Non-fungible tokens (NFTs)
You may owe taxes on the following transactions:
• Sale of a digital asset
• Exchange of digital assets for property, goods or services
• Exchange or trade of one digital asset for another
• Receipt of a digital asset as payment for goods or services
• Receipt of a new digital asset as a result of mining and staking activities
• Receipt of a digital asset as a result of an air drop
• Use of digital assets to pay for goods or services
• Any other disposition of a financial interest in a digital asset
• Receipt or transfer of a digital asset for free (without providing any consideration) that does not qualify as bona fide gift
Attorney Steven A. Leahy looks at the new rules on Today’s Tax Talk.