This year was not like any other year. Now that it’s over and we’re looking forward to a better promise for 2021, it’s time to think about taxes. While there were many other highlights of 2020, there were some tax points to try and others to watch out for.
Profit and loss
It’s hard to look at cryptocurrencies and 2020 without commenting on profit and loss. Bitcoin (BTC) is increasing in value significantly, to the delight of many investors. Of course, if you are short, you are less satisfied. And if you’ve invested in XRP, the news that the US Securities and Exchange Commission is unhappy with XRP has caused some impact on the price in an unwanted direction. When it comes to real and perceived value and purchasing power, this change is important. What about taxes?
On the topic: SEC vs. Ripple: An Expected but Unsolicited Development
Tax day delay: is the IRS softer?
The tax returns for 2020 are due on April 15, 2021, which is not too far away. Don’t count on a postponement like last year. In 2020, the IRS granted us all a 90-day grace period for shipping and refund payments through July 15, 2020 (IRS Notice 2020-17). The world may remain in the grip of COVID-19 during the upcoming tax return season, but most observers don’t expect the same freedom from tax authorities regarding tax returns in 2020.
The same can be said of the IRS, which facilitates many enforcement procedures. In early 2020, IRS Commissioner Chuck Rettig announced the People First initiative. Do you need to pay taxes in installments? The tax office will help, as it has a simplified installment learning process. In addition, from April 1 to July 15, 2020, the payment of installments has been suspended, in addition to tax rights and fees. Even new passport certificates were expected when tax arrears exceed $ 50,000, and most of the new tax changes were also expected.
What is now at the beginning of 2021? Many IRS employees still work mostly remotely, but don’t assume that this means that in early or mid-2021 you will lose a little of the freedom that taxpayers gained in 2020. This is unlikely. How about arguing with the tax authorities or in court that you don’t have to pay taxes to the tax authorities because the pandemic has affected you negatively? You can try this, but the IRS Commissioner has already vehemently rejected proposals that tax authorities should have a special pandemic allocation of fines. Again, don’t believe this.
IRS Cipher Tax Forms
Two years ago, the IRS turned the cryptocurrency into some kind of tax problem by adding a question to everyone’s tax return, and the same thing happened with the tax return for the year 2020. This means that the IRS is asking you a simple question from the tax returns for 2019 that were filed in the year 2020:
“Have you received, sold, sent, exchanged, or acquired any financial interest in any virtual currency at any time during 2019?”
It’s very simple: yes or no; It does not ask for numbers or details, although it will be listed elsewhere on the tax return.
This addition to your 2019 returns also applies to the 2020 returns you filed in 2021. In fact, you should assume that this will be the standard deduction for tax returns from now on. Because the IRS classifies the cryptocurrency as real estate, any sale will be either a profit or a loss, and a yes or no field can be very important. In fact, given the IRS’s record of offshore bank accounts, this could mean heavy fines or even a prison sentence.
The Ministry of Justice’s Internal Revenue Service has successfully stated that the mere absence of a check mark in the box associated with the foreign account report is intentional. Deliberate refusal carries higher fines and an increased threat of investigation. Even the Criminal Investigation Department of the IRS meets with tax authorities in other countries to share data and enforcement strategies in order to uncover potential cryptocurrency tax evasion. This is similar to the reminder of the foreign bank account problem listed in Appendix B.
If the taxpayer answers “no” and then turns out to have been involved in cryptocurrency transactions for a year, the fact that he answered “no” could be used directly to this new question (regarding penalties) against him. What if you had some kind of “signature authority” over the cryptocurrency that your parents or other unrelated relatives owned? This way you can help them manage their cryptocurrency.