- The IRS has released draft guidelines on reporting cryptocurrencies and other digital assets for 2022 tax returns.
- The agency plans to rename the term "virtual currency" to "digital asset" to provide more guidance when answering the question.
- However, experts say there are still reporting issues for filers and tax practitioners.
© Provided by CNBCThe IRS is releasing more details on digital assets for the 2022 tax year, in accordance with the draft guidelines.
Since 2019, tax returns have included a “virtual currency” question that requires taxpayers to check a box to identify taxable crypto activities. In 2022, the agency changed the term "virtual currency" to "digital asset", with more guidelines for "yes" approval.
Note that "digital assets" now include intangible tokens, or NFTs, which confer ownership of things like art and hard currency tied to a real-world asset.
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"I think it's a good change," said Matt Metras, registered agent and cryptocurrency tax expert at MDM Financial Services in Rochester, New York. "People who trade like NFTs don't see it as a virtual currency."
The "broader language" could include new categories, such as taxpayers buying digital assets from "games," which have become popular over the past year, he said.
"The IRS will always be behind the eight because it can't keep up with how fast the crypto space is changing," Metras said.
The draft policy states that applicants must say "yes" whether they received digital goods as an award, reward, or payment for goods or services. An agency may also require the positive response when selling, trading, or donating digital assets.
Questions have not yet been reported
As the agency works to clarify reporting guidelines for digital assets, questions remain for applicants and tax professionals.
For example, donations of less than $16,000 will not require donors to file a donation return in 2022. But the question requires taxpayers to check "yes" for gifts that may be less than that amount, said attorney Andrew Gordon, CPA and CPA. Chairman of the Gordon Law Group in Skokie, Illinois.
This can lead to IRS processing issues without proper gift activity on return. Overall, "there is still an education gap for taxpayers," he said.
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The American Institute of CPAs also expressed concern about the lack of clarity for taxpayers, citing a "cryptographically protected ledger" in the guidelines that could make filing confusing.
"We are proposing to move the 'virtual currency' theme into the proposed issuance and final IRS and Treasury Department regulations that define 'digital assets,'" said Eileen Sher, director of tax policy. and advocacy at the US Institute of CPAs.
The organization sent comments to the IRS on the matter in late August, asking for revisions with examples and clearer guidance before the 2022 return deadline.