Illustration: Natalie Peeples/Axios
The world of crypto is a new frontier for a host of government agencies — and the IRS is no exception.
Why it matters: Though changes are happening slowly, the agency’s trying to make sure that Americans who dabble in digital assets pay their fair share of taxes — while other regulators grapple with the more existential questions of crypto’s place in our financial system.
State of play: A new law is scheduled to go into effect in 2023 that will make tax filing for investors a bit easier, and cut down on scofflaws. Exchanges and brokerages will be required to report customer information directly to the IRS and to investors themselves (as now happens with stock transactions).
Between the lines: The ongoing crypto winter may have reduced the number of folks with taxable gains this year — but the volatility can complicate the tracking of net gains and losses for tax purposes, especially for those who trade actively, says Charles Kolstad, a partner at Withers who heads the law firm's worldwide cryptocurrency practice group.
Flashback: The agency ramped up enforcement efforts last year and has subpoenaed some exchanges, including Kraken and Circle, seeking customer information this year.
The IRS is also still trying to update its tax forms to capture all the rapidly evolving digital assets that Americans just may owe taxes on.
Worth noting: Some investors have assets locked up at FTX or other bankrupt crypto companies.
The bottom line: Tax season for all kinds of investors might hurt a little more than usual this year — digital assets are no exception.
