AICPA Pitches Alterations to Tax Standards and Forms

The American Institute of CPAs (AICPA) pitched a set of revisions to its Statements on Standards for Tax Services (SSTSs). They also sent the recommended revisions to the IRS separately. The recommendations were to revise the virtual currency question and instructions on Form 1040, requesting it to not be switched to the term “digital asset.”

The changes pitched to the SSTSs include alterations to the current SSTSs along with the three new standards and remarks on the entire issue of quality management and tax. Furthermore, the changes aim at the current and future needs of AICPA members with high ethical standards. 

Jan Lewis, the Tax Executive Committee Chair of the AICPA said in a statement that changing the standards is a great step forward to improving services offered by the members of AICPA so they are perceived as the best providers of tax services. 

The AICPA has requested to make the remarks by December 31, 2022. The comments can be made via an online form or email to SSTScomments@aicpa-cima.com. The SSTS document will be changed based on the comments and will be approved by May 31, 2023, effective from Jan 1, 2024. 

The AICPA also submitted its comments to the IRS separately regarding the virtual currency question on 2021 Form 1040 along with the draft 2022 Form 1040. According to the draft, the IRS is looking forward to changing the question from “virtual currency” to “digital asset.”  Currently, the question is “At any time in 2021, did you happen to sell, receive, exchange, or dispose of a financial interest in either of the virtual currencies?” Next tax season, the IRS has changed it to “At any time last year (then 2022), did you happen to: (a) receive/accept (any compensation, award, or reward); or (b) exchange, gift, sell, or dispose of a digital asset (or a financial interest)?”

Quite possibly the question could be interpreted as a question related to the purchase of other types of cryptocurrency such as NFTs. AICPA’s request is to get clarification on the question before the 2022 tax forms are finalized. This will help taxpayers comply with the question and report for virtual currency. 

It is requesting the IRS to explain the meaning of virtual currency and recommends the IRS change the meaning of virtual currency as described in the first part of Form 1040. The AICPA wants further clarification on whether all the terms “store of value,” “unit of account,” and “medium of exchange” need to be present on the form or if just one is sufficient. 

According to AICPA, all the terms should be defined and any asset with the “characteristics of virtual currency” should be dismissed because it’s not a part of the IRS’ official and binding guidance. Annette Nellen, from the AICPA Virtual Currency Task Force, said in a statement that they strongly urge the IRS to consider their recommendations, which will facilitate compliance from taxpayers. 

What You Should Do?

It is going to take some time for the IRS to consider the recommendations. Whatever decision the IRS takes, you as a taxpayer have to pay your taxes on time. For your convenience, you can use crypto tax software such as ZenLedger. This software is designed to meet your crypto tax needs. If you are new to the crypto world and don’t understand how is crypto taxed and how to file taxes, look no further. ZenLedger makes crypto taxation easier and even if you are a seasoned crypto investor/trader with thousands of transactions a year, ZenLedger can handle this quantity with ease. 

The AICPA is taking these steps for the ease of the taxpayer and helping them comply with the IRS. The revisions requested and the clarifications asked by the AICPA might work in the favor of the US taxpayer and provide some explanation to the ever-so-confusing crypto taxation. 

FAQs

1. What is AICPA?

AICPA or the American Institute of Certified Public Accountants is a national professional organization for CPAs or certified public accountants in the US. 

2. Do you have to pay taxes on cryptocurrency in the US?

Yes, you have to pay taxes on cryptocurrency in the US. If you sell the cryptocurrency within a year of buying it, you have to pay short-term capital gains tax. It is usually higher than the long-term capital gains tax. If you hold crypto tokens for more than a year and sell it, here, you will have to pay a long-term capital gains tax.

3. How to avoid crypto tax?

You must not avoid paying the crypto tax as the IRS knows it will be aware of all the transactions. Nevertheless, you could save some taxes by using the tips listed below. 

• Gifting someone a virtual currency is not a taxable event. However, one must make sure to keep the amount exempted in mind. 
• Transferring the tokens to another wallet, exchange, or account, as these are not considered a taxable event.
• Purchasing crypto tokens in USD and only need to pay taxes only when you sell. 
• If you receive a token in a hard fork, even then it isn’t a taxable event.

To Conclude 

The AICPA is taking these steps for the ease of the taxpayer and helping them comply with the IRS. The revisions requested and the clarifications asked by the AICPA might work in the favor of the US taxpayer and provide some explanation to the ever-so-confusing crypto taxation.