Tuesday August 9, 2022 – The IRS is still evolving their handling of Cryptocurrency. They included, for the first time, a “virtual currency” question on the 2019 1040 Tax Return. That year, the queston was placed on Schedule 1 “Additional Income and Adjustments to Income.” and asked “At any time in 2019 did you receive, sell, send, exchange or otherwise aquire any financial interest in any virtual currency?”
The question did not change for 2020 – but where the question was asked was. The queston was moved from Scheudle 1, a scheudle not included on every 1040 tax return, to the front page. Acutally, the first question – right under the taxpayers’ name and address.
In 2021, the question changed slightly. Instead of asking if a taxpayer – “otherwise aquired” an interest in virtual curreny – the question focused on the disposal of virtual currency, as that is the trigger to a taxable even.
In 2022 – the question is proposed “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)?”
This new queston is captures much more than the previous questions. Note the shift from “virtual curreny” to “digital assets.”
Attorney Steven A. Leahy comments on the proposed changes to the crypto queston on 1040 tax forms on Today’s Tax Talk.