New Tax Form Requires IRS To Question Your Crypto Ownership

New Tax Form Requires IRS To Question Your Crypto Ownership

The United States Internal Revenue Service (IRS) has recently added a question in regards to the ownership of cryptocurrency to its standard 1040 income tax form for the upcoming tax filing season. 

In a draft, if the “Additional Income and Adjustments to Income” section of the latest 1040 form was released. This included a change made to the section, with an additional question being added onto the form stating:

“At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

The question requires only provides two possible answers, ‘yes’ and ‘no’ and doesn’t ask or any further information:

Kelly Phillips Erb, Tax professional has said:

“Why does the location of the checkbox matter? Compliance. The checkbox is ostensibly on the form to remind taxpayers to report their cryptocurrency transactions. But those tax professionals like me who have seen the response to the checkbox on Schedule B know that this is also an easy way to hold those who don’t check the box – even by accident – accountable.”

She went onto say adds:

“The IRS can and has taken the position that willfully failing to check the box related to offshores interests can form the basis for criminal prosecution. Failing to check the box by accident can still result in headaches and penalties. I fully expect a similar result on the cryptocurrency side.”

The main sections of the form include “Additional Income” and “Adjustments to Income,” which are included below the question.

“Taxpayers who file Schedule 1 to report income or adjustments to income that can’t be entered directly on Form 1040 should check the appropriate box to answer the virtual currency question. Taxpayers do not need to file Schedule 1 if their answer to this question is NO and they do not have to file Schedule 1 for any other purpose,” the IRS noted.

The services guidance answers questions in regards to crypto-related transmissions for investors who hold digital currencies as a capital asset and establishes general guidelines of tax law to determine whether cryptocurrency qualifies as property for federal tax filing purposes. 

It will be interesting to see how this situation plays out. For more news on this and other crypto updates, keep it with CryptoDaily!

Investment Disclaimer
Related Topics: