IRS Changes Tax Requirements; Purchasing Crypto with Fiat (USD) Doesn’t Need to be Reported


If a person has purchased cryptocurrencies with USD, such a transaction is not reportable to the Internal Revenue Service (IRS), clarifies the updated FAQ on Virtual Currency Transactions on the official website.

If your only transactions involving virtual currency during 2020 were purchases of virtual currency with real currency, you are not required to answer yes to the Form 1040 question, which wants to know about your crypto activity.

image1

This update by the IRS provides clarity to taxpayers who were unsure whether purchasing crypto in USD requires them to report it.

However, this only applies to real currency, that is, fiat, and not purchasing crypto with other cryptocurrencies as that is a taxable event.

Virtual currencies are treated as property under the IRS. If you hold the cryptocurrency for one year or less before selling or exchanging it, you will have a short-term capital gain or loss, and for more than one year, it counts as long-term capital gain or loss. The period for the same starts on the day after you acquired the virtual currency.

The IRS also considers airdrops, which results in you receiving a new cryptocurrency, a taxable event. Income from airdrops is calculated by the fair market value of the new cryptocurrency.

Virtual currency received as a bona fide gift is not recognized as income until sold, exchanged, or otherwise disposed of. Additionally, donating cryptocurrency to a charitable organization is not taxable as it is treated as a non-cash contribution.

Get Daily Headlines

Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

What to Know More?

Join Our Telegram Group to Receive Live Updates on The Latest Blockchain & Crypto News From Your Favorite Projects

Join Our Telegram

Stay Up to Date!

Join us on Twitter to Get The Latest Trading Signals, Blockchain News, and Daily Communication with Crypto Users!

Join Our Twitter

Add comment

E-mail is already registered on the site. Please use the Login form or enter another.

You entered an incorrect username or password

Sorry, you must be logged in to post a comment.
Bitcoin Exchange Guide