IRS Focus On Virtual Currency

The IRS has renewed its focus on virtual currency transactions. The front page of the 1040 for 2020 requires all individuals to answer the question: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”.

Virtual currency for investment purposes is treated as property and taxed at short-term and long-term capital gains rates. Payment for services made in virtual currencies, such as Bitcoin, are valued at the U.S. dollar amount on the date received. These amounts are to be included on W-2 and 1099 forms.

For answers to frequently asked questions related to virtual currencies see the link to the IRS’s FAQ page:

https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

If You Turned 72 This Year Your IRA RMD Is Waived

The Secure Act signed at the end of 2019 increased the IRA required minimum distribution (RMD) age from 70 1/2 to 72. However, the CARES Act passed earlier this year also waived RMD’s for individuals that turned 72 in 2020. Therefore, individuals that turned 72 this year would have until the end of 2021 to take their first RMD.

PPP Loan Forgiveness

Banks have recommended holding off on applying for PPP loan forgiveness as we wait to see if several bills in Congress are passed that would streamline the forgiveness process. One potential bill includes a provision to automatically forgive loans less than $150,000.

Home Office Deduction

As more employees worked from home in 2020, they may be asking if they can deduct home office and other unreimbursed employee costs. This deduction is no longer allowed for employees after the tax changes that passed in 2017.

The deduction is available to self-employed and independent contractors on Schedule C. They can deduct a room or space in their home that is used regularly and exclusively at their principal place of business.

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

How Long Should I Keep Records?

Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.

For more information on how long to hold specific records see the below IRS link:

https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records#:~:text=Keep%20records%20for%203%20years%20from%20the%20date%20you%20filed,securities%20or%20bad%20debt%20deduction.