The Internal Revenue Service (IRS) has revised the cryptic questions asked on Form 1040, the tax form that all U.S. taxpayers use to file their annual income tax returns.
New cryptic tax questions
The Internal Revenue Service (IRS) last week released a draft Form 1040 for tax year 2022. Form 1040 is a tax form used in the United States for filing individual income tax returns
The cryptic question on the top page of Form 1040 now reads.” At any time in 2022, did you:(a) receive as compensation, award, or reward, or (b) sell, exchange, gift, or otherwise dispose of digital assets (or financial interests in digital assets)?”
The new question expands on an earlier version of Form 1040 for the 2021 tax year, which states:” At any time in 2021, did you receive, sell, exchange, or otherwise dispose of any virtual currency financial interest?”
In March, the IRS issued the following notices Form 1040, Form 1040-SR, Form 1040- All taxpayers filing NRs must check either “yes” or “no” to the virtual currency question. This question must be answered by all taxpayers, not just those who conducted transactions involving virtual currency in 2021.”
The tax authorities explain that taxpayers may check “No” if they merely own cryptocurrency and did not engage in crypto transactions at any point during the year. Further, if their activities were limited to holding or transferring crypto within their wallets or accounts, they purchased crypto “using real currency, including purchases using real currency electronic platforms such as Paypal or Venmo,” and “hold, transfer, or purchase virtual currency as described above engage in any combination of the above,” the IRS elaborates, can check “no.”
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