Some changes are coming to cryptocurrencies. Despite the Internal Revenue Service seeing them pretty much the same as stocks, they are indeed different. It’s not like you can walk into a store and try to buy a product with the Apple stock you hold. Though the use of cryptocurrencies involves transactions that you can use to purchase stuff, it’s not entirely there yet.
Needless to say, cryptocurrencies are different, but the profit generated from the sale is seen the same as stocks.
Now, lawmakers are working on bringing some changes to the law that involves cryptocurrencies. However, these won’t include taxes as it’s pretty self-explanatory. Cryptocurrencies sold at a profit will be capital gains, and a loss will be a capital loss. This, of course, assuming the capital gains are realized. There won’t be a tax on unrealized capital gains from cryptocurrencies like any other property. It’s as simple as that, and there won’t be a change to this. But, there will be new requirements for cryptocurrency exchange platforms.
IRS monitoring cryptocurrency wallets
From 2023 and onwards, cryptocurrency exchange platforms like Coinbase and Binance will be required to record transactions. This will be for both the users of these platforms and the Internal Revenue Service. The gross proceeds from the sales and capital gains and losses will also be reported; thus, you will need to report them and pay the tax accordingly.
Business requirements involving crypto transactions
On top of all these new requirements for exchange platforms, all businesses that receive $10,000 or more in cryptocurrencies will be required to report the sender’s identity to the Internal Revenue Service.
These changes and new things added to the tax code won’t have an impact on the taxpayers. These changes are for creating a baseline. Essentially, these changes and new laws are going to be an infrastructure for future uses. Since the blockchain is quite complicated and it’s hard to add new features, especially exchange platforms, 2023 is reasonably enough time.
Future changes to the crypto tax provision
Many changes will come to the crypto tax provision in the future. These new proposals are just the beginning, and more cryptocurrency gains are going to be treated as ordinary income as the average holding time isn’t that long with cryptocurrencies.
On the other hand, there is a chance that cryptocurrency exchange platforms are sharing their complete information with the Internal Revenue Service and the agency monitoring the activities of the wallets. We’ll see what the future holds, and as soon as more proposals are made, we’ll keep you updated.