Tax & Accounting News
IRS Alters Cryptocurrency Question For All Taxpayers
The Internal Revenue Service (IRS) has officially changed its cryptocurrency question on personal tax return forms for all taxpayers.
The crypto question on the front page of Form 1040 now reads: “At any time during 2022, did you: (a) receive (as a reward, award, or compensation); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
The new question expands on its previous version on Form 1040 for the tax year 2021, which states: “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”
In March 2022, the IRS announced that all tax filers, even those who have not had any involvement with cryptocurrency during the prior tax year, will need to answer this question on their tax forms.
The official notice reads:
The IRS reminds taxpayers that there is a virtual currency question at the top of Form 1040, Form 1040-SR and Form 1040-NR. It asks: "At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?"
All taxpayers filing Form 1040, Form 1040-SR or Form 1040-NR must check one box answering either "Yes" or "No" to the virtual currency question. The question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving virtual currency in 2021.
It is important to note that taxpayers who owned crypto coins, but did not engage in any virtual currency transactions, can check the "No" box.
The IRS also shared that purchasing crypto “using real currency, including purchases using real currency [on] electronic platforms such as Paypal and Venmo,” and “engaging in a combination of holding, transferring, or purchasing virtual currency as described above" mean the "No" box can be ticked.
To make tax filing easier next year, make sure you carefully track any of your cryptocurrency transactions with Ethereum, Bitcoin, or other brands.
Did you know about this federal tax form change?
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