Everyone has to Answer Cryptocurrency Question on 2022 Taxes
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The IRS decided to change the term from “virtual currency” to “digital asset” this year so it would include more than just cryptocurrencies like Bitcoin, but also non-fungible tokens and stablecoins. The change first showed up on the draft version of the Form 1040 that the IRS previewed last August. If you or your tax preparer has started your 1040 this is when you declare if you bought or sold any cryptocurrency last year.
Additionally, the IRS has revised the instructions for answering the question and clarified them to help taxpayers answer it correctly. All taxpayers need to answer the question, whether or not they engaged in any transactions involving digital assets. Everyone who files a Form 1040, 1040-SR or 1040-NR will have to check one box, answering either yes or no to the digital asset question.
For the 2022 tax year, the form states: “At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
The IRS said the digital assets can include convertible virtual currency and cryptocurrency, as well as stablecoins and NFTs. Taxpayers will need to check the yes box if they:
- Received digital assets as payment for property or services provided;
- Transferred digital assets for free (without receiving any consideration) as a bona fide gift;
- Received digital assets resulting from a reward or award;
- Received new digital assets resulting from mining, staking and similar activities;
- Received digital assets resulting from a hard fork (a branching of a cryptocurrency’s blockchain that splits a single cryptocurrency into two);
- Disposed of digital assets in exchange for property or services;
- Disposed of a digital asset in exchange or trade for another digital asset;
- Sold a digital asset; or,
- Otherwise disposed of any other financial interest in a digital asset.
For more information visit IRS: Updates to question on digital assets; taxpayers should continue to report all digital asset income | Internal Revenue Service