It is not new that it’s a pretty universal rule that if you receive money, the IRS wants to know about it. So, it is not surprising that in recent years the agency has asked about cryptocurrency on the 1040 for individual taxpayers. It is a little newer, however, that cryptocurrency has really taken off, so now the IRS is asking about it on forms for estates, trusts, partnerships, and C and S corporations.
With this expanded range of questions, it is probably worth bringing a little more attention to what the IRS really wants to know when asking this question. As this issue has come up, many taxpayers have thought that they had nothing to report. Sure, they did dabble some in this realm, but some just made a purchase once (possibly even many years ago) and traded it through an exchange into a new form of cryptocurrency. And in this type of transaction, it’s easy to think there is nothing to report for they never actually saw any money come back to them because of it. This is something that still needs to be shown, however.
Overall, if a taxpayer did any of the following activities, they will need to report it to the IRS:
If this is something you are only doing in a small way, it is easy to overlook it when it comes to tax planning. In fact, it is possible that the outcome on your tax return will be very minimal. At the same time, however, you do not want to give the IRS any reason to have your tax return stand out to them. So, make gathering any information about your crypto holdings part of your standard tax preparation. And do it soon while there is enough time to do it before the weight of deadlines starts to feel heavy.
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