Let’s Talk Tax Season and Digital Assets

virtual currencyAs digital assets wax and wane in value, it is a good idea to understand what information is due to the Internal Revenue Service (IRS) this time of year.


According to the IRS, a “digital asset” is an asset that is digital (of course) but also “recorded on a cryptographically secured, distributed ledger or any similar technology.” This includes Stablecoin, non-fungible tokens, and virtual currency. The IRS considers digital assets to be property, and regulations and tax principles governing property sales apply to digital assets.


Below are some points about reporting digital assets this year:

  • This year, the IRS delayed the requirement for owners and traders of digital assets to file an information return on proceeds of digital assets that exceed $10,000. The information return requirement was created by the Infrastructure Investment and Jobs Act. The IRS has suspended the reporting requirement until it finalizes and publishes rules and identifies the forms needed for reporting.
  • For those involved in the FTX meltdown, you may be wondering if you can report a loss on your tax returns if you have a claim in the ongoing bankruptcy action. A loss cannot be reported until the resolution of the loss is complete and resolved. This means for most of those with a stake in the FTX bankruptcy, you must hurry up and wait. FTX has been unable to restart its exchange and is liquidating assets. Good news that came out of the recent January 31, 2024 hearing includes the revelation that the exchange may be able to make its clients whole on their investments. The bad news, and the reason for a new lawsuit involving FTX, is that bankruptcy rules allow FTX to value repayment on rates circa November 2022, when the company entered bankruptcy.
  • All taxpayers who file standard tax return forms are required to answer one question regarding their involvement with digital assets. Those required to report “yes,” on the form include those who transacted in digital assets, received digital assets from mining and similar activities, or who sold or disposed of any digital asset. If you maintain a digital wallet, moved digital assets among your accounts, or purchased digital assets with hard currency, you can answer “no” to the question.


At present, maintaining firm faith in digital assets requires some resilience. If you have questions about your digital or other assets and compliance, speak with an experienced tax attorney for guidance.


Experienced tax attorneys help you when challenged by tax litigation or criminal tax allegations

With offices in Chicago and Cleveland, the legal team at Robert J. Fedor, Esq., LLC delivers strong representation and guidance to those facing significant tax liability, offshore tax concerns, or payroll tax issues. Call 800-579-0997 or contact us today.


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