Cryptocurrency, NFTs and the metaverse are likely going to be unavoidable as tax professionals navigate each tax season. Now’s the time to learn how the IRS treats digital assets, including the requirements for reporting income received from selling, trading and exchanging them for other products and services.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.
Q: Do wash sale rules apply to digital asset transactions?
A: The current guidance is no; the wash sale rules do not apply. However, there is pending legislation that expands wash sale treatment to include digital asset transactions.
Q: If you buy a cup of coffee with virtual currency, would this be considered a taxable transaction?
A: You could have a taxable transaction depending on the basis in the virtual currency. You are exchanging property for coffee and would pay taxes on the gain for the virtual currency sold to buy the coffee.
Q: Is there a report that will show if the taxpayer received a fork or an airdrop?
A: The client would have to look at their wallet to determine if an airdrop or hard fork was received by the taxpayer.
Q: Is Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, filed at receipt of cash or with the tax return?
A: File Form 8300 by the 15th day after the date the cash was received. If that date falls on a Saturday, Sunday or legal holiday, file the form on the next business day. It is separate from the tax return.
To learn more about the tax implications of digital assets and cryptocurrency, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.