EXCLUSIVE: IRS Cracks Down on Crypto Tax Evasion: What Crypto Bros Need to Know

July 5, 2024
Exclusive Interview - IRS' New Crypto Reporting Rules: What You Need to Know

The Biden administration’s recently finalized crypto reporting rules bring significant changes for cryptocurrency investors, marking a pivotal shift in tax compliance for the digital asset market. Set to take effect in 2025, these stringent regulations by the U.S. Department of the Treasury and the IRS aim to ensure accurate reporting of crypto gains and losses, directly impacting both retail investors and crypto brokers.

Last Friday, the Internal Revenue Service (IRS) has unveiled the crypto reporting rules aimed at curbing tax evasion. The new regulations mandate that crypto brokers report digital asset sales and exchanges to the IRS, to ensure accurate tax filing on crypto transactions.

The crypto accounting firm Crypto Tax Made Easy, which uses the X handle @CryptoTaxSucks, shared insights on the potential impact of these rules on retail investors in an exclusive interview with The Shib Daily. “The main impact the new regulations will have on retail investors is the potential changes in how tax is calculated and how much information the IRS will have on them,” they said via Direct Messaging on the platform X. 

One significant change is the potential requirement for wallet-based cost tracking. This could affect taxable gains and necessitate careful consideration by investors when choosing platforms for buying and selling tokens. The crypto accounting firm explained, “For example, the regulations seem to indicate that wallet-based cost tracking could be required for determining which lots of crypto are being disposed. Right now, investors can take a multi-wallet approach when determining which lot of crypto they disposed of.”

However, there’s a silver lining for retail investors. The new rules clarify that transaction fees can be added to the cost basis of purchased tokens and deducted from the proceeds of sold tokens. “This could help reduce the taxable gains of most transactions in a straightforward way, whereas right now I know a lot of investors don’t know how to deduct their transaction fees and omit it from their tax returns,” the firm noted.

The firm warned, “The new regulations could also increase the amount of records the IRS has about each taxpayer, so any discrepancies when reporting will be easier to catch.” They added, “This will make it even more important for crypto investors in the U.S. to strive for accurate crypto tax reporting to avoid increasing audit risk.”

As the new reporting requirements take effect in 2025, crypto investors must stay informed and adapt to these changes. Accurate tax reporting will become more critical than ever, and investors should seek guidance from knowledgeable accountants and tax software to navigate the evolving landscape.

The Biden administration’s stricter crypto tax rules mark a significant step toward greater transparency and accountability in the cryptocurrency market.

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Yona has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Daily is an official media and publication of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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