,More transparency: An illustration showing a physical banknote and coin imitations of bitcoin. A new rule in the US is set to force businesses to disclose trades of digital assets of more than US$10,000. ― AFP
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NEW YORK: Sure, you might have to actually pay United States taxes on those crypto trades. But at least it will be easier to figure out how much you owe.
A new push by Congress to require crypto brokers to report transactions to the Internal Revenue Service (IRS) could create some unwelcome tax bills but could clarify rules for traders and users of bitcoin and other digital tokens, potentially strengthening the system in the long run, people in the industry said.
The new rules – a last-minute addition to the US$550bil (RM2.32 trillion) bipartisan infrastructure package now being considered by the US Senate – would also force businesses to disclose trades of digital assets of more than US$10,000 (RM42,200). The provisions are designed to raise US$28bil (RM118.16bil).
The measures add to increased scrutiny the IRS has recently applied to traders of bitcoin, ethereum and other digital assets. The agency has promised it will issue new rules that clarify how those virtual currencies should be taxed.
People who trade digital currencies must pay income taxes on any gains, even if some crypto investors have been ignoring their tax obligations. But even for those who want to follow the law, it can be difficult to keep track of what’s owed.
Filing taxes on crypto trades can create huge headaches, especially for those who conduct multiple transactions each year. While traditional stock brokerages are already required to send detailed tax forms to clients, crypto exchanges aren’t. Even if firms wanted to help their clients file taxes, it’s not always clear how to do that under the current regulations.
In addition, tax obligations can pop up in surprising places. People who use digital currencies to pay for things – like, say, a Tesla, or a pizza – are supposed to pay taxes on any increase in value of the crypto they spend. It’s a key difference between using digital “currencies” and actual, fiat currencies such as the US dollar to conduct commerce.
Andrew Johnson, a project manager at a large national bank, has invested tens of thousands in crypto and uses a dedicated service to figure out what he owes in taxes. He’s been using CoinTracker, which he learned about though a YouTube channel that he trusts.
“Most would benefit from a tracking service to help with taxes,” he said.
“For me, I decided it was worth the cost to not have to manually track all the trades I did – which could take hours or days.”
Cryptocurrency exchanges and others in the industry have raised concerns that the US Senate is rushing the rules into effect without consulting them first.
Some wondered whether the new rules and regulatory attention would encourage mainstream investors to join the space – or hurt the appeal of cryptocurrencies by killing its anything-goes ethos.