Wait, When Did This Virtual Currency Question Appear On My 1040 Tax Form?

The IRS Form 1040 now includes a checkbox which taxpayers must address regarding virtual currency. The form asks taxpayers if “at any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”  The key question at hand is who is required to answer “Yes” and who may answer “No?” National Taxpayer Advocate Erin M. Collins addresses these and many other questions taxpayers have when it comes to virtual currency and their taxes.

Given the explosion in virtual currency, the IRS has increased its focus on virtual currency tax compliance. In 2019, the IRS sent letters to over 10,000 American taxpayers who may have failed to report their virtual currency transactions and pay the associated income taxes. The National Taxpayer Advocate says, “taxpayers should proceed with care in order to experience the benefits of virtual currency while avoiding its pitfalls.”

Read More