- The IRS finalized its Form 1040 for the 2020 tax year.
- A crucial question about transacting cryptocurrencies has been added to page one.
- It’s a sign that the IRS is looking to take crypto taxes more seriously down the line.
Back in August, the IRS released a draft of Form 1040—its individual income tax return—for the tax year 2020, which moved a crucial question about cryptocurrency right to the top of the first page. And with the release of the 2020 Form 1040 on the IRS’s website, that change has been made official.
There was no announcement, but cached versions of the IRS’s Form 1040 landing page show that the site was directing visitors to the 2019 version of the form as recently as December 10.
When US taxpayers filing as individuals confront their 2020 income taxes, they’ll now be asked, “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
The change marks a significant update from last year’s individual income tax form, which only included the crypto question on Schedule 1, a 1040 supplement that taxpayers have to request separately. This year, though, all US taxpayers must disclose their crypto transactions.
Shehan Chandrasekara, a tax expert at the software company CoinTracker, told Decrypt that the new placement of the question “shows how seriously the IRS is looking into the crypto tax reporting issues going forward.”
Conveniently for long-term crypto holders, simply hanging onto your crypto doesn’t actually count as “receiv[ing], sell[ing], send[ing], exchang[ing], or otherwise acquir[ing” virtual currency, according to IRS guidelines.
A revised draft of Form 1040, released in October, contained explanatory language about what might be sufficient reason for taxpayers to check the “yes” box: examples included “a sale of virtual currency,” and “the receipt or transfer of virtual currency for free (without providing any consideration), including from an air-drop or hard fork.”
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.