The Internal Revenue Service (IRS) has modified the crypto question asked on Form 1040, the tax form used by all U.S. taxpayers to file an annual income tax return.
New Crypto Tax Question
The Internal Revenue Service (IRS) published a draft of Form 1040 for the 2022 tax year last week. Form 1040 is the tax form used for filing individual income tax returns in the U.S.
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, the IRS published a notice stating: “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.”
The tax authority explained that taxpayers can check “no” if they merely own cryptocurrency and have not engaged in any crypto transactions at any time during the year. In addition, they can check “no” if their activities were limited to holding or transferring crypto within their own wallets or accounts, purchasing crypto “using real currency, including purchases using real currency electronic platforms such as Paypal and Venmo,” and “engaging in a combination of holding, transferring, or purchasing virtual currency as described above,” the IRS detailed.
What do you think about the new IRS tax question? Let us know in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons
This post was originally published here.