Questions About Cryptocurrency

1. Questions To Ask About Cryptocurrency
2. Investing In Cryptocurrency For Beginners
3. What Are Cryptocurrencies

In fact, the only predictable thing about cryptocurrency is its unpredictability. But, as we strongly believe, while there may be several nausea-inducing drops downs, the general trajectory is upwards. The questions are: how smartly can you invest, keeping your investment profile in mind, and can you stomach a few bad episodes? The IRS is also looking for taxpayers earning cryptocurrency for services provided or performed without reporting the income. The new question seems simple, but perhaps not. If you look to the instructions for the 2020 IRS Form 1040 regarding “Virtual Currency” as guidance regarding the new question.

Many Bitcoin owners have adopted a “Play dumb and hope for the best” strategy when it comes to taxes. But now that strategy—never a great idea at the best of times—is riskier than ever in light of a proposed change to next year’s tax forms.

The Internal Revenue Service revealed the change in a preview of the Form 1040 that every American uses to file their federal income tax. Now, right at the top of the form, below the address line, is a new yes/no question that asks if the filer has acquired an interest in virtual currency:

The proposed IRS change comes as the agency continues to ramp up scrutiny of Bitcoin and other cryptocurrencies. In some cases, the focus of the IRS has been criminal activity involving digital currency, while in others the agency has sought to identify those who fail to report profits from trading.

Questions To Ask About Cryptocurrency

While millions of Americans own cryptocurrency accounts, a relatively small portion of them have reported income from them. In a lawsuit with cryptocurrency giant Coinbase, for instance, the IRS testified that only 807 individuals reported Bitcoin-related transactions in 2015.

In the last three years, Coinbase and other exchanges have provided more tax reporting tools but the number of filers remains relatively small. The owner of a firm specializing in crypto taxes told the Wall Street Journal that he estimates fewer than 150,000 crypto owners filed returns last year.

According to the Journal, which first reported the new IRS form, the change to the 1040 amounts to laying “a trap” for those who would feign ignorance of the reporting requirements—and is similar to approach the agency took to forcing Americans to disclose overseas income.

The aggressive new tactic by the IRS is likely to irk many in the cryptocurrency industry given that current tax rules consider any sale or purchase involving crypto—such as buying a cup of coffee with Bitcoin—to be a taxable event. The industry has lobbied for an exemption for transactions under $200, but the agency has said any such changes to its rules must come from an act of Congress. And while the industry has been increasing its influence in Washington, DC, it still faces hostility from lawmakers and from the White House.

Barring any changes, the virtual currency question will appear on next year’s next forms. In 2019, the IRS did include a cryptocurrency question, but only on a form for additional income known as Schedule 1 that many Americans don’t use.

More must-read finance coverage from Fortune:

Investing In Cryptocurrency For Beginners

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• Feds’ “stablecoin” letter may boost crypto ambitions of Facebook, Square
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• The world’s biggest hedge fund is working from tents in the forest during the COVID pandemic
• One pandemic, two recoveries: New Yorkers are three times more likely to be jobless than Nebraskans

What Are Cryptocurrencies

This story was originally featured on Fortune.com