Taxation of Cryptocurrency Resources

Susan B. Anders, , PhD, CPA/CGMA

Individual taxpayers have probably noticed that they have been required to answer questions on Form 1040 about virtual currency transactions in recent years. The U.S. Congress has introduced, and in some cases passed, a variety of legislation addressing different aspects of cryptocurrency, although the federal government's perspective of virtual commerce has not been timely nor in step with investors who actually acquire and use digital assets. The relatively modest amount of extant IRS guidance addresses cryptocurrency as property and reflects an attitude of suspicion towards the intentions of taxpayers who participate in the virtual exchange economy. Along these lines, the IRS Criminal Investigations (CI)_Cyber Crimes Unit pursues investigations related to cryptocurrency abuses—such as defrauding investors and laundering stolen cryptocurrency—among its targeted focuses. There is no question that such manipulations do occur, as evidenced by IRS CI seizing virtual currency valued at more than $3.5 billion in 2021 and already exceeding that in 2022 (FS-2022-19, March 2022, https://bit.ly/39EerYl).