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IRS Expands Crypto Question on Tax Form

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The Internal Revenue Service (IRS) has changed the cryptocurrency question asked on Form 1040, the tax form used by all U.S. taxpayers to file their annual tax return.

New Cryptocurrency Tax Question

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Last week, the Internal Revenue Service (IRS) released a draft Form 1040 for the 2022 tax year. Form 1040 is the tax form used to file U.S. personal income tax returns.

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The crypto question on the front page of Form 1040 now reads: “At any time during 2022, you: (a) received (as a reward, reward, or compensation); or (b) sell, exchange, gift or otherwise dispose of the digital asset (or financial interest in the digital asset)?”

Draft form 1040 for 2022. Source: IRS.
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The new question expands on the previous version of Form 1040 for the 2021 tax year, which states, “At any time during 2021, did you receive, sell, trade, or otherwise dispose of any financial interest in any virtual currency?”

Form 1040 for 2021. Source: IRS.

In March, the IRS issued a notice stating: “All taxpayers filing Form 1040, Form 1040-SR, or Form 1040-NR must check one box when answering Yes or No to the virtual currency question. This question should be answered by all taxpayers, not just taxpayers who made a virtual currency transaction in 2021.”

The tax authority clarified that taxpayers can mark “no” if they simply own cryptocurrency and have not made any cryptocurrency transactions at any time during the year. In addition, they may check “no” if their activity was limited to holding or transferring cryptocurrencies within their own wallets or accounts, buying cryptocurrencies “using real currency, including purchases using real currency electronic platforms such as Paypal and Venmo” , and “engaging in the combination of holding, transferring or purchasing virtual currency as described above,” the IRS specified.

What do you think of the new IRS tax issue? Let us know in the comments below.

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Credit : news.bitcoin.com

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