The National Taxpayer Advocate Blog has published an article, titled “New NTA Blog: Wait, When Did This Virtual Currency Question Appear on My 1040 Tax Form?,” which explains the new virtual currency question on the 2020 tax return and how tax filers can approach this questio . The article begins as follows:
Are you one of those early birds who has already sat down to prepare your 2020 tax return? Notice anything different right under your name and address? This year, near the top of Form 1040, U.S. Individual Income Tax Return, you will be asked: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” In response, you must check the box “yes” or “no” before your return will be accepted for electronic submission. No one should take this question lightly.
In answering that question, you will have to ask yourself a threshold question: At any time during 2020 did I own virtual currency, which includes all cryptocurrencies? If the answer to that question is yes, then you must ask yourself several other questions including: Have I paid for goods or services with virtual currency? Did I receive virtual currency in exchange for goods or services? Did I sell virtual currency during 2020? Do I have records documenting all of my purchases, sales, and exchanges? Did I report all my sales and exchanges and calculate my gain or loss resulting from the increase or decrease in value of my virtual currency? Do I report my gains and losses as short-term or long-term capital gains or losses? What records should I maintain? Well, you are not alone in asking those questions. And there is confusion with the word “acquire” in the wording of the question and the instructions.
To see the full article, click here: “New NTA Blog: Wait, When Did This Virtual Currency Question Appear on My 1040 Tax Form?”
Posted by Bella Hoang, Managing Associate Editor, Wealth Strategies Journal.