Tax Tips: What taxpayers need to know about digital asset reporting and tax requirements
Taxpayers filing 2023 tax returns must check a box indicating whether they received digital assets as a reward, award or payment for property or services or disposed of any digital asset that was held as a capital asset through a sale, exchange or transfer.
A digital asset is a digital representation of value that is recorded on a cryptographically secured, distributed ledger or any similar technology. Common digital assets include virtual currency and cryptocurrency, stablecoins and non-fungible tokens.
Examples of digital assets transactions include:
• Sale of digital assets.
• Receipt of digital assets as payment for goods or services.
• Receipt of new digital assets because of mining and staking activities.
• Receipt of new digital assets because of a hard fork.
• Exchange of digital assets for property, goods or services.
• Exchange or trade of digital assets for another digital asset(s).
• Any other disposition of a financial interest in digital assets.
Reporting digital assets transactions
Taxpayers must report all income related to their digital asset transactions.
• Use Form 8949, Sales and other Dispositions of Capital Assets, to calculate a capital gain or loss and report it on Schedule D (Form 1040), Capital Gains and Losses.
• If the transaction was a gift, file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
• If individuals received any digital assets as compensation for services or disposed of any digital assets they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type. For example, they would report W-2 wages on Form 1040 or 1040-SR, line 1a, or inventory or services on Schedule C.
• If an employee was paid with digital assets, they must report the value of assets received as wages. Similarly, if they worked as an independent contractor and were paid with digital assets, they must report that income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Schedule C is also used by anyone who sold, exchanged or transferred digital assets to customers in connection with a trade or business.
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Tax Tips: IRS reminder to U.S. taxpayers living, working abroad: File 2023 tax return by June 17; those impacted by terrorist attacks in Israel have until Oct. 7
WASHINGTON – The Internal Revenue Service reminds taxpayers living and working outside the U.S. to file their 2023 federal income tax return by Monday, June 17, 2024. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.
This deadline does not apply to taxpayers who live or have a business in Israel, Gaza or the West Bank, and certain other taxpayers affected by the terrorist attacks in the State of Israel. They are granted relief until Oct. 7, 2024, to both file and pay most taxes due. For more information, check out Notice 2023-71.
Taxpayers unable to file their tax returns by the June deadline can request a further extension to file, but not pay, until Oct. 15.
Qualifying for the June 17 extension
If a taxpayer is a U.S. citizen or resident alien residing overseas or is in the military on duty outside the U.S., on the regular due date of their return, they are allowed an automatic 2-month extension to file their return without requesting an extension. If they use a calendar year, the regular due date of their return is April 15, and the automatic extended due date would be June 15. Because June 15 falls on a Saturday this year, the due date is delayed until the next business day, June 17.
A taxpayer qualifies for the June 17 extension to file and pay if they are a U.S. citizen or resident alien, and on the regular due date of their return:
• They are living outside the United States and Puerto Rico and their main place of business or post of duty is outside the United States and Puerto Rico, or
• They are in military or naval service on duty outside the United States and Puerto Rico.
Qualifying taxpayers should attach a statement to the return indicating which of these two situations applies.
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