Cryptocurrency transactions are a significant new asset class of taxation. The IRS considers cryptocurrency as an asset, not a currency. This means any transaction involving cryptocurrency is treated as a capital gain activity, either short or long-term. Transactions that may trigger tax consequences include:
- Airdrop
- Selling
- Purchasing with a Crypto.
However, purchasing a Crypto is not a tax-related activity.
Example: Purchasing a cup of coffee using cryptocurrency results in a capital gain or loss activity. The question is, who will report these activities to the IRS?
Build Back Better Bill defines reporting requirements for all cryptocurrency transactions. Facilitators of cryptocurrency are classified as brokers and must report all transactions on 1099-B schedules. Cryptocurrency platforms like Coinbase and OKcoin will issue 1099-B forms for all tax-related transactions.
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