Learn more about Government Initiatives and Reporting Requirements surrounding the response to the growth of cryptocurrency markets. watch our full webinar on the topic at web address to learn more about the topic

1. Cryptocurrency &
Taxation 2022 Update
Government Initiatives
and Reporting Requirements

2. DISCLAIMER
This presentation and these materials are designed to provide information in regard to the subject matter
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understanding that Stephen Moskowitz, Moskowitz LLP, and the instructor are not engaged in rendering
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IN ACCORDANCE WITH TREASURY REGULATIONS CIRCULAR 230, WE INFORM YOU THAT ANY TAX ADVICE
CONTAINED IN THIS COMMUNICATION WAS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE
USED, FOR THE PURPOSE OF (I) AVOIDING TAX-RELATED PENALTIES UNDER THE INTERNAL REVENUE
CODE OR (II) PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED
MATTER ADDRESSED HEREIN.

3. Biden’s March 9 2022 Executive
Order on Digital Assets
Taxation of NFTs and Cryptocurrency
▪ Protect consumers, investors, and businesses in the United
States
▪ Protect United States and global financial stability and
mitigate systemic risk
▪ Mitigate the illicit finance and national security risks posed
by misuse of digital assets
▪ Reinforce United States leadership in the global financial
system and in technological and economic competitiveness
▪ Promote access to safe and affordable financial services
▪ Explore a US Central Bank Digital Currency (CBDC)

4. National Cryptocurrency
Enforcement Team
Taxation of NFTs and Cryptocurrency
▪ NCET will identify, investigate, support and pursue the
department’s cases involving the criminal use of digital
assets, with a particular focus on virtual currency exchanges,
mixing and tumbling services, to commit or facilitate criminal
activity.
▪ NCET will lead DOJ’s efforts to coordinate with domestic and
international law enforcement partners, regulatory agencies
and private industry to combat the criminal use of digital
assets.
▪ NCET will build capacity to aggressively investigate and
prosecute serious crimes involving cryptocurrency

5. Civil Cyber-Fraud Initiative
Taxation of NFTs and Cryptocurrency
▪ Be honest about your current cybersecurity procedures. Lying
about your current security protocols will subject a business to
substantial fines
▪ Monitor and immediately report breaches
▪ Provide only optimum cybersecurity products or services.
Providing deficient products or services will result in
substantial financial penalties
▪ Develop strong teams dedicated to data security that
continually monitor system activity
Several types of actions for which DOJ intends to hold
individuals and companies accountable under the False
Claims Act. Businesses should therefore:

6. Treasury Targets
Cryptocurrency Cyber Ransoms
Taxation of NFTs and Cryptocurrency
▪ United States law enforcement applying its anti-money
laundering/countering the financing of terrorism (AML/CFT)
framework for virtual currency
▪ FinCEN enforcement action against non-compliant virtual
currency money transmitters facilitating ransomware
payments, such as BTC-e in 2017 and the virtual currency
mixing service Helix in 2020
▪ United States is taking steps to improve transparency
regarding ransomware attacks and associated payments
▪ Treasury’s Office of Foreign Assets Control’s (OFAC)
designation of SUEX OTC, S.R.O. (SUEX), for facilitating
ransomware.

7. Taxation of Cryptocurrency
Taxation of NFTs and Cryptocurrency
▪ IRS Notice 2014-21 provides that cryptocurrency is treated as
property for federal tax purposes.
▪ Notice 2014-21 holds that taxpayers must recognize gain or
loss on the exchange of cryptocurrency for cash or for other
property.
▪ Gain or loss is recognized every time that cryptocurrency is
sold or used to purchase goods or services.
▪ Reporting depends on the type of transaction conducted and
the length of time the position was held.

8. Cryptocurrency Settled for Cash
Taxation of NFTs and Cryptocurrency
▪ Report a capital gain on Form 8949.
▪ Held for one year or less taxed at ordinary tax rates
▪ Held for more than one year is considered a long-term
capital gain.
▪ Capital losses offset capital gains in full, and a net capital
loss is limited to $3,000 Default for stock transactions is
the first-in, first-out (FIFO) method of accounting.
▪ Specific identification can drastically reduce the
recognized gain

9. Paying for Goods and Services
with Cryptocurrency
Taxation of NFTs and Cryptocurrency
▪ IRS Notice 2014-21 Question 4 addresses how to treat virtual
currency received as payment for goods or services.
▪ IRS Notice 2014-21 Question 6 addresses whether gain or
loss should be recognized when exchanging virtual currency
for other property.
▪ When a business receives cryptocurrency for services or as
payment for goods, the business is required to recognize
revenue when payment is received.

10. Taxation of Hard Forks
and Splits
Taxation of NFTs and Cryptocurrency
▪ A hard fork is when a single cryptocurrency splits in two.
▪ A hard fork requires all nodes or users to upgrade to the latest
version of the protocol software simultaneously.
▪ If NO new crypto, this is a SOFT FORK and there is NO taxable
income. It’s a protocol upgrade
▪ If new crypto received is taxable ordinary income in the year
received.

11. Reporting Foreign
Cryptocurrency Accounts
Taxation of NFTs and Cryptocurrency
▪ Financial Crimes Enforcement Network (FinCEN) Form 114,
▪ Form 8938, Statement of Specified Foreign Financial Assets
▪ FinCEN Form 114 thresholds are $10,000 or more at any
point during the year, and the reporting threshold for Form
8938 is either an aggregate value of:$100,000 or more on the
last day of the year or$150,000 or more at any point during the
calendar year
▪ FinCEN Form 114 is a standalone filing
▪ Form 8938 is filed with an individual’s tax

12. Taxation of NFT Creators
Taxation of NFTs and Cryptocurrency
▪ Creation of NFTs by itself, like creating art, IS NOT a taxable event
▪ Sale of the NFT on trading platforms or auctions IS a taxable event
▪ Creator of NFTs will be considered self-employed in the business of
creating and selling NFT tokens taxed at ordinary income rates
▪ NFT creators will usually entitled to deductions from expenses
incurred when creating the token from your sale value.
▪ Gas fees are tax-deductible.

13. Charitable Fundraising with
NFTs and Cryptocurrency
Taxation of NFTs and Cryptocurrency
▪ Cryptocurrencies are classified as property assets by the IRS
▪ Donations of cryptocurrency including NFTS are tax deductible
charitable contributions for donors and tax-free for the
nonprofit recipient
▪ Tax deduction equals the fair market value of the donated
cryptocurrency or NFTs, assuming the property was held for
more than one year.
▪ Charities need institutional-grade cryptocurrency account

14. New Cryptocurrency
Tax Reporting Requirements
Taxation of NFTs and Cryptocurrency
name, address and phone number of each customer
the gross proceeds from any sale of digital assets; and
capital gains or losses and whether such capital gains or losses were short-
term (held for one year or less) or long-term (held for more than one year).
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Starting in 2023, the following information is required to
be reported by cryptocurrency exchanges to the IRS:
Penalties will be as high as $250 per customer, up to a maximum
$3 million penalty.
If you receive more than $10,000 in cash, you are required to file
IRS Form 8300 (Report of Cash Payments Over $10,000 Received
in a Trade or Business).

15. Contact the legal team
at Moskowitz LLP for a
free consultation today.
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