Bitcoins, NFT … how do you report them to the IRS?

If you sold cryptocurrencies in 2021, you must report your earnings to the IRS if you also sold “NFTs”. The point on the statements that you need to fill out.

Pending the tax reform, which will enter into force on 1eh January 2023, the gains you have made in 2021 on the occasional sale of digital assets, and in particular cryptocurrencies (Bitcoins, Ethereum, etc.), will be taxed under the scheme that has been in place since 2019. They will be subject to this using a single fixed deduction of 30% of their net amount of your capital losses for the year. In order for the tax authorities to calculate your tax, you must state these gains yourself on certain attached tax returns, which you attach to your income statement no. 2042.

Declaration Nos 2086 and 2042 C

You must calculate your taxable capital gain for 2021 by filling in the declaration no. Tax household during the year. It will also allow you to calculate your total annual capital gain or loss, all transfers combined to be reported in Box 3AN (Capital Gains) or Box 3BN in Supplementary Statement No. 2042 C. You must return these two entries in the same forms and deadlines as your income statement no. 2042. If you declare your income via the internet, you can fill it out online. If you state your income on paper, you can pick them up at your public finance center or download them from the tax website, unless the tax authorities have sent them by post at your home.

Good to know. If your cryptocurrency sales did not exceed € 305 in 2021, your capital gain is tax free. In this case, you do not have to report it on a Declaration No. 2042 C, but you still have to fill in Annex No. 2086 taxation and you have nothing to indicate.

Declaration No. 3916-3916 bis

If you live in France and have opened, had, used or closed a digital asset account abroad in 2021, you must also attach to your statement No. 2042 an attached statement No. 3916-3916 bis. You must complete one for each account that members of your tax household have abroad. In addition, check box 8UU located on page 4 of your Declaration No. 2042. Again, this appendix can be completed online or on paper. If you do not return it, you will be fined € 750 per person. undisclosed account or € 125 per omission or inaccuracy, which can go up to € 10,000. The amount will be doubled (€ 1,500 and € 250) if the value of your overseas accounts has exceeded € 50,000 at any point during 2021.

Declaration No. 2031-SD and No. 2042 C-PRO

The above rules do not apply to you if you carry out the activity of buying-reselling digital assets regularly and not occasionally, because the tax authorities then assess that you are carrying out a commercial activity. In this case, your earnings are taxable as industrial and commercial profits (BIC) and not subject to PFU. You must therefore complete the same declaration as merchants and artisans: declaration of result no. Simplified “micro-BIC” scheme. The first must be completed electronically and returned to the IRS before May 19, 2022. The second can be completed in the same forms and deadlines as your Declaration No. 2042.

Good to know. Gains from the sale of cryptocurrencies obtained in return for your participation in the creation and operation of a digital asset system (so-called “mining”) are taxable in the category of non-commercial profits (BNC). You must enter them in a declaration of results No. 2035-SD (and its attached tables) if you fall under the controlled declaration regime, and in a supplementary declaration No. 2042 C-PRO if you fall under the simplified “micro- BNC ”.

NFT: taxation specified

In the family of cryptocurrencies, NFTs (“non-fungible tokens” or “non-fungible tokens” in French) have experienced remarkable growth over the last two years, and they are recording record transactions. The problem is that the taxation of the gain on the sale of these virtual assets is uncertain. On 15 April 2021, Senator Les Républicains de l’Oise, Jérôme Bascher, questioned the Ministry of Economy and Finance about the conditions for taxing these gains, indicating that three regimes could be considered: that which applies to the sale of cryptocurrencies, that which applies to transfers of movables and that which applies to transfers of works of art. On January 25, 2022, the deputy Les Républicains de l’Orne, Véronique Louwagie, also questioned the ministry about the possibility of assimilating the NTFs with works of art. So far, however, the ministry has not decided. Therefore, if you are selling NFTs, it is important to contact your public finance center (or call 0809 401 401) to find out how to report your earnings. It will also tell you which statement you need to fill out: No. 2042 C if PFU applies, No. 2048-M-SD or No. 2092-SD if the capital gains scheme applies and No. 2091-SD when applying the tax on precious objects.

Depending on the solution chosen, the tax and social security contributions to be paid will obviously not be the same. In the first case, your annual capital gain will be exempt if your sales for the year do not exceed € 305 and are otherwise taxed at 30%. In the second case, your capital gains will be exempt if your selling price per. NFT does not exceed € 5,000 and is taxed at 36.5% otherwise, minus a reduction of 5% per. years of detention after another. Finally, in the third case, you only have to pay a tax of 6.5% of your sales price if it exceeds € 5,000, except for the possibility of applying the capital gains scheme to furniture.

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