18 April deadline: With Crypto’s inclusion, is the US tax season different this time?

Lavina Daryanani
Source: CoinGeek

Tax filings are going in full swing in the US, and for the first time in three years, the scheduled deadline [18 April] is set to be met. Thus far, the Internal Revenue Service has been able to largely manage and process the filings lined up, despite the macro-obstacles on its path.

The delayed due dates for 2020 and 2021 returns, to some extent, managed to spatter seeds of chaos amongst taxpayers, but by and large, things have been going on smoothly for payers who have fairly simple taxes.

The ‘crypto’ surprise factor

The IRS, as a matter of fact, has already started paying more attention to digital currency and NFT-centric transactions. As such, the law requiring notification to the IRS of transfers of at least $10,000 in cryptocurrency takes effect only next year. However, the agency does have a reporting requirement for acquisitions and sales on individual returns. So, consumers still need to report the sales and acquisitions of their 2021 crypto investments to the body.

This is surprising as many new crypto owners don’t yet realize that the IRS asks for the data, Mike Greenwald, a partner at accounting firm Friedman LLP, told Bloomberg. He added,

“It requires a conversation that clients weren’t expecting to have. They don’t think about digital currencies the same way the IRS does.”

As highlighted a couple of months back, the IRS had brought to light that they were keeping an eye on “virtual currency transactions.” The tax return form explicitly had a yes or no question about the novel form of currency on the first page.

Plausible repercussions that might follow

Per experts from the space, crypto would be subject to capital gains when exchanged or sold at a profit. Swapping digital coins, cashing out for U.S. dollars, or even making a purchase might as well fall under the taxable ambit. Formal regulatory guidance, however, hasn’t been provided yet.

Well, people usually look for loopholes to escape and not disclose their HODLings. However, doing so would mean diverting the bullet towards oneself. For individuals who fail to report taxable cryptocurrency activity, they could be subject to interest, penalties, or even criminal prosecution.

Per Ryan Losi, a Richmond, Virginia-based CPA and executive vice president of accounting firm PIASCIK,

“That’s where the hammer comes down because they can say that you lied on a government document under penalties of perjury.”

Milkwaukee-based CPA and tax specialist, David Canedo, highlighted that consumers could also face tax fraud or tax evasion charges. Even though the IRS has a three-year lookback for errors, there is no statute of limitations for fraud. He asserted,

“You’re playing with fire if you don’t report it.”