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2021 line item for crypto transactions on Internal Revenue Service form 1040

cagcrispcagcrisp Posts: 1,057 ✭✭✭✭✭

New for tax year 2021 from the Internet Revenue Service:

“ At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

EVery taxpayer MUST check either Yes or No.

If, in 2021, you engaged in any transaction involving virtual currency, check the “Yes” box next to the question on virtual currency on page 1 of Form 1040 or 1040-SR. A transaction involving virtual currency includes, but is not limited to:

• The receipt of virtual currency as payment for goods or services provided;
• The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift;
• The receipt of new virtual currency as a result of mining and staking activities.
• The receipt of virtual currency as a result of a hard fork;
• An exchange of virtual currency for property, goods, or services;
• An exchange/trade of virtual currency for another virtual currency;
• A sale of virtual currency; and
• Any other disposition of a financial interest in virtual currency.

Comments

  • cagcrispcagcrisp Posts: 1,057 ✭✭✭✭✭
    edited February 8, 2022 3:13AM

    A transaction involving virtual currency does not include the holding of virtual currency in a wallet or account, or the transfer of virtual currency from one wallet or account you own or control to another that you own or control. If your only transactions involving virtual currency during 2021 were purchases of virtual currency for real currency, including the use of real currency electronic platforms such as PayPal and Venmo, you are not required to check the “Yes” box next to the virtual currency question. You must not leave the field blank even if you are not required to answer “Yes”. If you disposed of any virtual currency that was held as a capital asset through a sale, exchange, or transfer, check “Yes” and use Form 8949 to figure your capital gain or loss and report it on Schedule D (Form 1040).
    If you received any virtual currency as compensation for services or disposed of any virtual currency that you held for sale to customers in a trade or business, you must report the income as you would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1, or inventory or services from Schedule C on Schedule 1).

  • derrybderryb Posts: 36,009 ✭✭✭✭✭

    @cagcrisp said:
    A transaction involving virtual currency does not include the holding of virtual currency in a wallet or account, or the transfer of virtual currency from one wallet or account you own or control to another that you own or control. If your only transactions involving virtual currency during 2021 were purchases of virtual currency for real currency, including the use of real currency electronic platforms such as PayPal and Venmo, you are not required to check the “Yes” box next to the virtual currency question. You must not leave the field blank even if you are not required to answer “Yes”. If you disposed of any virtual currency that was held as a capital asset through a sale, exchange, or transfer, check “Yes” and use Form 8949 to figure your capital gain or loss and report it on Schedule D (Form 1040).
    If you received any virtual currency as compensation for services or disposed of any virtual currency that you held for sale to customers in a trade or business, you must report the income as you would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1, or inventory or services from Schedule C on Schedule 1).

    link to your source?

    "Do you hear alarm bells ringing? Neither do I. And that’s a huge problem." - Simon Black

  • cagcrispcagcrisp Posts: 1,057 ✭✭✭✭✭

    @derryb said:

    @cagcrisp said:
    A transaction involving virtual currency does not include the holding of virtual currency in a wallet or account, or the transfer of virtual currency from one wallet or account you own or control to another that you own or control. If your only transactions involving virtual currency during 2021 were purchases of virtual currency for real currency, including the use of real currency electronic platforms such as PayPal and Venmo, you are not required to check the “Yes” box next to the virtual currency question. You must not leave the field blank even if you are not required to answer “Yes”. If you disposed of any virtual currency that was held as a capital asset through a sale, exchange, or transfer, check “Yes” and use Form 8949 to figure your capital gain or loss and report it on Schedule D (Form 1040).
    If you received any virtual currency as compensation for services or disposed of any virtual currency that you held for sale to customers in a trade or business, you must report the income as you would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1, or inventory or services from Schedule C on Schedule 1).

    link to your source?

    Internal Revenue Service...
    Form 1040 Instructions...

  • derrybderryb Posts: 36,009 ✭✭✭✭✭
    edited February 8, 2022 8:50AM

    @cagcrisp said:
    A transaction involving virtual currency does not include the holding of virtual currency in a wallet or account, or the transfer of virtual currency from one wallet or account you own or control to another that you own or control. If your only transactions involving virtual currency during 2021 were purchases of virtual currency for real currency, including the use of real currency electronic platforms such as PayPal and Venmo, you are not required to check the “Yes” box next to the virtual currency question. You must not leave the field blank even if you are not required to answer “Yes”. If you disposed of any virtual currency that was held as a capital asset through a sale, exchange, or transfer, check “Yes” and use Form 8949 to figure your capital gain or loss and report it on Schedule D (Form 1040).
    If you received any virtual currency as compensation for services or disposed of any virtual currency that you held for sale to customers in a trade or business, you must report the income as you would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1, or inventory or services from Schedule C on Schedule 1).

    The bold is what matters most to crypto traders, don't let the rest confuse you. Also keep in mind that while one is required to check the crypto block if cryptos were purchased or sold in 2021, there is no income to be taxed (or Form 8949 required) unless crypto was disposed of in 2021. The Form 8949 is simply where one categorizes and itemizes his individual trades before the totals are transferred to the Schedule D, which acts as a summary.

    Like the 1099s, the "Yes" block is intended to intimidate filers into being forthcomeing with the numbers. The IRS is interested to know when you dispose of a crypto capital asset. That is what triggers a taxable event, and reporting, on the income. Other than checking the "Yes" block in the years in which cryptos are bought or sold, there is no other reporting required unless the crypto asset was disposed of in that given year. It will be interesting to see what happens when one checks the crypto "Yes" block because he purchased cryptos, but does not claim any income on the 8949 and Schedule D because he sold none during the year. In this case will the "Yes" trigger questions from the IRS? Let's hope not.

    "Do you hear alarm bells ringing? Neither do I. And that’s a huge problem." - Simon Black

  • RobMRobM Posts: 524 ✭✭✭

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

    "At any time during 2020, did you receive, sell, or otherwise acquire any financial interest in any virtual currency?"

    “ At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

    So what exactly is new other than the IRS tweaking the language? Yes, in 2019 the question did not appear on 1040, but was on Schedule 1 additions to income. Tax software asked the question. There is only subtle difference in the question for all 3 years it has been asked. Basically, it is the same question as the IRS asks about foreign accounts.

  • cagcrispcagcrisp Posts: 1,057 ✭✭✭✭✭
    edited February 8, 2022 12:08PM

    @RobM said:

    >

    So what exactly is new other than the IRS tweaking the language?

    >
    >

    In 2020, many interpreted that you were required to report non-taxable transactions. In 2021 you are required to report only taxable transactions...

  • RobMRobM Posts: 524 ✭✭✭
    edited February 8, 2022 2:07PM

    I doubt many people reported sending from one wallet to another. More likely some were moving to wallets offshore where they intend to evade taxation. IMO, the IRS simply tightened up the definitions a bit because the 2022 rules for 1099s will identify much of the crypto sales activity. "Otherwise acquire" was in the language in 2019 and 2020 simply to get crypto owners to voluntarily tag themselves prior to the new and reduced 1099 threshold laws. If you bought crypto, you either "received" or "otherwise acquired" it and were expected to check the box even though there is no tax implication until you sell. But the IRS now knows you have crypto, will flag your account, and be ready to pounce if your future tax reporting or unexplained wealth doesn't make sense.

  • tyler267tyler267 Posts: 1,231 ✭✭✭✭

    @RobM said:
    "At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency".

    "At any time during 2020, did you receive, sell, or otherwise acquire any financial interest in any virtual currency?"

    “ At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

    So what exactly is new other than the IRS tweaking the language? Yes, in 2019 the question did not appear on 1040, but was on Schedule 1 additions to income. Tax software asked the question. There is only subtle difference in the question for all 3 years it has been asked. Basically, it is the same question as the IRS asks about foreign accounts.

    You are right, the question has been on the returns for a while. The interesting part is that once you check the box and sign the return, you have stated under the threat of perjury that the info is true and correct to the best of your knowledge. The new crypto 1099 reporting requirements go into effect for tax year 2023. I think the way those past crypto boxes are checked could become very relevant for certain taxpayers in the future.

  • RobMRobM Posts: 524 ✭✭✭
    edited February 9, 2022 11:52AM

    I checked yes. :(

  • rte592rte592 Posts: 1,379 ✭✭✭✭✭

    @RobM said:

    @DrBuster said:
    irs....eat a shlong

    Right now.....screen shot from DrBuster's Ring doorbell :p

    That's a lot like the cartoon.
    Where they just want to talk...
    The home owner asks how many are you?
    4
    then talk amongst yourself.

  • DrBusterDrBuster Posts: 5,299 ✭✭✭✭✭
    edited February 9, 2022 4:09AM

    ..

  • cohodkcohodk Posts: 18,488 ✭✭✭✭✭

    Language gentlem> @DrBuster said:

    ..

    That was quite a little rant. Lol

    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • DrBusterDrBuster Posts: 5,299 ✭✭✭✭✭

    Sorry for the potty mouth guys

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