AccountingCryptocurrencyTaxes

CNBC published incorrect tax advice about reporting of cybercurrency

SHAME ON @CNBC editors and author @sahahtobrien! This type of inaccurate reporting of tax policy and procedure in this article should be called out for the misleading information portrayed as public advice. At best it is sloppy reporting. At worst it represents a lack of understanding of the topic covered and the spreading of incorrect tax advice to a large audience.

“The IRS has put a question about cryptocurrency holdings on page one of 2020 tax returns”

This is FALSE. The 2020 Form 1040 has a question about cybercurrency transactions, not holdings. The question says “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” There is no question on page one or anywhere else in the 2020 income tax return about your cryptocurrency holdings.

 

“Got bitcoin or other crypto? It could come back to bite you if you don’t let the IRS know about it.”

This is FALSE. There is no need to let IRS or any other government agency know about the bitcoin or cryptocurrency you own unless you had an income transaction involving it.

 

“Regardless of how you interacted with any cryptocurrencies last year, you’re expected to include the information on your 2020 tax return.”

This is FALSE. There are ways that a person could interact with cryptocurrency that should not be reported on your 2020 tax return. For example, gifts of cybercurrency, marital settlements of cybercurrency and inheritance of cybercurrency are all examples of interactions that, in most cases, would not be reportable on your 2020 tax return.

When giving tax advice, publicly or privately, the words chosen and the accuracy of those words matters. While it seems clear that the author intended to produce a useful article, the result is quite the opposite. A person following the advice as stated would file an incorrect tax return.

Having pointed out these incorrect reporting of income tax details for the year 2020, we should also note that it seems likely that the reporting requirements for cybercurrency will change in future tax years after 2020, possibly as soon as 2021 but more likely in the next few years to come. It seems likely that cybercurrency holdings will eventually be reportable in other disclosure filings with the U.S. Treasury Department, but there is no indication that these holdings will be reportable in an income tax return. I covered the possible change in reporting requirements as announced by the Treasury in other recent blog posts.

Finally, I want to point out that this is not the only false reporting of federal tax issues by major media publications this year. We saw quite a few false reports in the first two months of the year; some of these reporting problems are also covered in my other publications and interviews. I don’t know what’s going on at the editorial desks of these publications, but we’ve not seen this pattern of lack of professional responsibility before in my career.