The latest news revealed that the United States tax authority had urged crypto investors to apply for an extension as tax day draws closer. The announcement addressed investors yet to document their crypto activities and tax records.
According to the report, the tax authority in the US had previously chosen April 18, 2023, as the deadline for investors to file their tax return or an extension for the year 2022. The regulators urged investors seeking extensions to make payments to validate their applications.
Shehan Chandrasekera, CoinTracker’s chief of tax strategy, encourages investors to hurry and collate their crypto transactions alongside their tax remittance for 2022. He advised those struggling with it to file for an extension before the deadline on April 18.
In addition, the report showed that those who filed for an extension have until October 15, 2023, to organize their tax returns. More so, each filer is expected to make a specific payment while applying for the extension.
IRS Plans To Spread Its Tentacles Over Cryptocurrencies
In recent times the IRS has been striving to expand its control over crypto-related activities. To achieve its aim, the tax regulated has reported adding some questions and classifications that required filers to expose deeper info about their crypto activities. Chandrasekera urges investors to be careful of the approach.
Last year, the IRS agency updated Form 1040, which guides investors’ income tax returns. The new addition requires investors always to indicate the crypto they receive, including the ones earned through awards, personal rewards, or compensation.
In addition, the agency stated that it wants to know if a taxpayer receives or sends their crypto assets as gifts. Commenting, Chandrasekera noted that investors have no option but to comply with the authority by answering the question even though receiving or sending crypto as gifts is not taxable.
In addition, he urged crypto investors to proactively sort their tax obligations out to avoid fallout with the regulators. He added that usually, each crypto exchange should hand their customers tax forms at the end of each year.
However, he said some exchanges don’t give out the tax forms anymore. Hence, each investor is responsible for requesting the form to help them stay abreast of their crypto transaction and profits or losses.
Chandrasekera Urges Investors To Look Out For New Tax Rule
In addition, Chandrasekera pointed out that many crypto investors incurred losses in the year 2022, thinking that they did not need to record it since they lost. However, he stated it is essential that investors should record both their profits and losses.
Explaining further, he said losses could help crypto traders to reduce taxable profits. Sometimes, it can help to offset income taxes. In summary, he urges investors not to disregard their losses histories.
According to the report, it pays to file for an extension than fail to disclose your tax returns. The two offenses have different penalties attached to them. Also, Chandrasekera claimed that the RSI penalized each offender based on the lateness of his payment and how much interest they would deduct.
Probably, this is the last tax session whereby crypto traders would have to work under the same system. In the subsequent tax years, investors should expect a new set of rules, including the new classification of brokers and NFT tax.