IRS: Releases Draft from 1040 and it's include virtual currency.

[cryptomaniac_xxx]

Please see: https://www.irs.gov/pub/irs-dft/f1040--dft.pdf

Some additional changes in the draft, virtual currencies checkbox and could be answer by Yes or No. I'm not a US citizens but for those crypto enthusiast, you might want to think about your crypto assets and record every bit of your transactions.

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[so98nn]

America's got no chills!

If IRS is taking the virtual currencies seriously then it could be good thing for the loyal tax payers. It can increase the credibility of the person who receives the passive income from bitcoin/miscellaneous crypto world.

The government knows, pretty good amount of population owns the crypto currencies and amount in USD could be just off the chart.

One of the articles states it's around 14.4% of American's who has crypto asset investment. The figures date back to 2019 and new numbers are yet to be out.^{36.5 million Americans own crypto}

With that kinda figures I am guessing it's futuristic step to involve BTC income into the legal system. This will benefit the government for sure.

Well, for those who wants to hide their income in terms of taxes, then it may not be option anymore.

The question still exists though: How they will track those assets?

[o_e_l_e_o]

That's not new. Last year's forms had the exact same question, except it was on the Schedule 1 (Additional Income) part of the 1040 rather than on the base 1040 form. You can see an example of 2019's Schedule 1 below:



All the IRS have done here is move it up to be front and center. Given that you don't have to file a Schedule 1 unless you have additional income or adjustments to declare, I wonder if the IRS thought that people were lying by omission by simply not filing a Schedule 1 if they didn't need to for other reasons, and therefore avoiding the question on "virtual currencies"? Can't see any other good reason to single out "virtual currency" and place it on the base 1040, when they don't do so for any other currency.

[DougM]

That's not new. Last year's forms had the exact same question, except it was on the Schedule 1 (Additional Income) part of the 1040 rather than on the base 1040 form. You can see an example of 2019's Schedule 1 below:



All the IRS have done here is move it up to be front and center. Given that you don't have to file a Schedule 1 unless you have additional income or adjustments to declare, I wonder if the IRS thought that people were lying by omission by simply not filing a Schedule 1 if they didn't need to for other reasons, and therefore avoiding the question on "virtual currencies"? Can't see any other good reason to single out "virtual currency" and place it on the base 1040, when they don't do so for any other currency.

  Is 'receive' including buying? Why would IRS care about receive/acquiring anyway?  Isn't any tax based on sale/exchange/transfer away?

[o_e_l_e_o]

Is 'receive' including buying?

Yes.

Why would IRS care about receive/acquiring anyway?

Because receiving/acquiring includes mining, earning, or receiving in exchange for goods or services, all of which the IRS will tax you for.

Isn't any tax based on sale/exchange/transfer away?

Those are certainly a taxable events, but so too are all the things I listed above. Pretty much any time any cryptocurrency changes ownership, the IRS want to stick their noses in a get a piece of the action. You can see here for all the things they consider taxable: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

[DougM]

Is 'receive' including buying?

Yes.

Why would IRS care about receive/acquiring anyway?

Because receiving/acquiring includes mining, earning, or receiving in exchange for goods or services, all of which the IRS will tax you for.

Isn't any tax based on sale/exchange/transfer away?

Those are certainly a taxable events, but so too are all the things I listed above. Pretty much any time any cryptocurrency changes ownership, the IRS want to stick their noses in a get a piece of the action. You can see here for all the things they consider taxable: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

Thanks for the info and the link o_e_l_e_o.  I had to chuckle at this question:

Q4.  Will I recognize a gain or loss when I sell my virtual currency for real currency?

if cypto currency isn't 'real' how can it generate capital gains?    just kidding of course, but I do think they could have come up with a better adjective here....

[AmoreJaz]

Is 'receive' including buying?

Yes.

Why would IRS care about receive/acquiring anyway?

Because receiving/acquiring includes mining, earning, or receiving in exchange for goods or services, all of which the IRS will tax you for.

Isn't any tax based on sale/exchange/transfer away?

Those are certainly a taxable events, but so too are all the things I listed above. Pretty much any time any cryptocurrency changes ownership, the IRS want to stick their noses in a get a piece of the action. You can see here for all the things they consider taxable: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

they need to slowly implement how regulations will look like when it comes to cryptocurrency. i have seen the old form last year also here in the forum. so this is not new anymore. i guess people need to be careful in putting all the info about their crypto activities because IRS will uncover it in other ways. they are realizing that going against with crypto will not do any good, so better include it in their regulations and work from there.

[verita1]

This is a thread that was created by a forbescrypto writer on the question on US ISR Form 1040 about whether in 2020 you sell, send or exchange any virtual currency.
I also think the nation is interested in investigating whether taxpayers are using virtual currency in order to provide answers to the American crypto community.

https://twitter.com/TheCryptoCPA/status/1296863406620901379?s=19

[avikz]

IRS started including such questionnaires since 2019. It's just that the question has now gained more prominence and moved up to a more visible place because IRS wants to know your crypto holdings and your trading activities. It's great that US is recognizing the cryptocurrency. Majority of the other nations are still in dilemma to recognize cryptos in such a way and many others are planning for a blanket ban on it. IRS is no joke but US people should at least feel lucky that their government and taxing authority is taking cryptos seriously!

If you pay taxes on your crypto holdings, it goes without saying that your crypto holdings are perfectly legal within the system. Whereas majority of the other countries, cryptocurrencies are still looked at with sheer suspicion.

[o_e_l_e_o]

https://twitter.com/TheCryptoCPA/status/1296863406620901379?s=19

That thread isn't entirely accurate. He says that in the past you only had to answer the question if you filed a Schedule 1, which is correct, but given that trading cryptocurrency needs to be declared as additional income, and even just holding cryptocurrency needs to be declared as a gain or a loss, then everyone who was involved in cryptocurrency should have filed a Schedule 1 and therefore answered the question. As I said above, the only good reason to move the question from Schedule 1 up to the front of the 1040 is if the IRS think that there are a significant amount of people lying by omission, whose had no reason other than cryptocurrency to file a Schedule 1, and therefore did not file one and avoided the question altogether.

IRS is no joke but US people should at least feel lucky that their government and taxing authority is taking cryptos seriously!

Disagree. The whole point of bitcoin is to use a currency which isn't dependent on third parties and which can't be controlled by the government. I don't want my government sticking their noses in places where it does not belong and it is not needed, and near the top of that list is bitcoin.

[DaveF]

Going to be interesting to see what happens if they ever go after people for not checking the yes box when the IRS knows that said person received but did not spend crypto.
They seem to want to make a grab for it in every way possible. Receive crypto pay income tax, hold it and sell it for a profit, pay cap gains tax.

-Dave

[kryptqnick]

I don't think it's fair that people have to check the box and pay taxes for any financial operations with cryptocurrencies. The most reasonable solution thing I see is the income tax being applicable to cryptos in the same way as if a person received income in fiat. If it's income from trading, it should also be reported and taxed. But if a person simply bought, sold or was hodling crypto, I don't think it's fair to tax such things because analogous things with fiat would not result in transactions. But what's good is that at least there are no negative changes.

[dothebeats]

Most people who have had small dealings with cryptocurrencies wouldn't really care much about checking that box. Heck, it could be that even large traders would ignore that and check 'No' in the end and the IRS wouldn't know, unless they are already watching some people who are getting some big gains on cryptocurrencies. They are slowly moving the checkbox up for better visibility, and it's kind of a passive-aggressive move to them since as of late, a lot of traders are raking in profits due to the sudden boom of cryptocurrencies in the market.

They really want to establish the fact that they are serious in taxing cryptos, and they might add some more questions in the future if they think that that checkbox wouldn't suffice on what they wanted to do.

[roadrunnerjaiv2025]

Now that some governments, especially from superpower countries like the U.S., are starting to take cryptocurrency more seriously, I guess we can safely say that the hard work the pioneers and the bitcoin community have put into bitcoin introduction and utilization is finally paying off in terms of the ultimate goal--decentralization of the financial system. However, the fact that it's just a survey and they seem to be hesitant about using the term "cryptocurrency" to refer to bitcoin and altcoins means we have a long way to go before decentralized currency gets fully adopted. 

[o_e_l_e_o]

Heck, it could be that even large traders would ignore that and check 'No' in the end and the IRS wouldn't know, unless they are already watching some people who are getting some big gains on cryptocurrencies.

If they don't know already, you can safely assume the IRS will find out if you are using centralized exchanges to trade. Coinbase are in bed with the IRS. They not only hand over their customers' data, but they also give the IRS access to the blockchain analysis arm of the company (Coinbase Analytics). As soon as the government start putting pressure on other exchanges, just like Coinbase they will immediately fold and hand over your data. Exchanges are not your friend - they do not care about your data. They care about staying on the right side of the government so they can continue to be allowed to operate. They will sell you out without a second thought.

However, the fact that it's just a survey and they seem to be hesitant about using the term "cryptocurrency" to refer to bitcoin and altcoins means we have a long way to go before decentralized currency gets fully adopted.

A 1040 tax return couldn't be further from "just a survey". Their definition of "virtual currency" is such to include cryptocurrency along with other virtual currencies:

Cryptocurrency is a type of virtual currency that utilizes cryptography to validate and secure transactions that are digitally recorded on a distributed ledger, such as a blockchain.

[vapourminer]

i had been listing my crypto buys/sells/mining/merchant payouts years before that question popped up, and im very glad i did. after all, gains are gains, and are taxable - whether you bought and sold crypto or buckets of shit. its all taxable if you made profit. those who tried to hide it may be in for a big surprise.

pseudo anonymity is just that, pseudo. and as blockchain analysis gets better, all those transactions, on a very public blockchain, will come back to haunt many.

i always assumed they would be able to track transactions from the beginning and acted accordingly. computing power will always grow (obviously) and even stuff like monero will likely get tracked at some point. they can go back as far as they want with sufficient computing power. and they will have that computing power. maybe not now but certainly in the future and they will use it.

believe me i hate taxes as much as the next guy, but theres no way around it in the land of the *cough* free. hide it and be prepared to pay the price.

[figmentofmyass]

All the IRS have done here is move it up to be front and center.

any idea if statistics are available on the number of schedule 1 filers vs the total taxpaying population? this probably expands who sees/answers the question by tens of millions.

Given that you don't have to file a Schedule 1 unless you have additional income or adjustments to declare, I wonder if the IRS thought that people were lying by omission by simply not filing a Schedule 1 if they didn't need to for other reasons, and therefore avoiding the question on "virtual currencies"? Can't see any other good reason to single out "virtual currency" and place it on the base 1040, when they don't do so for any other currency.

i think they are having a real problem with legitimate ignorance on the part of retail investors. crypto exchanges aren't subject to the same 1099-B reporting requirements that have traditionally kept investors compliant, and it takes a lot of volume ($20k + 200 transactions) to hit 1099-k thresholds on exchanges that send them---coinbase, kraken, etc. offshore exchanges ignore all this stuff. in comparison, your stock broker must send you a 1099-B regardless of the amounts in question. i reckon their next move will be to bring 1099 reporting requirements in line with traditional investments.

[o_e_l_e_o]

any idea if statistics are available on the number of schedule 1 filers vs the total taxpaying population? this probably expands who sees/answers the question by tens of millions.

I'm not sure if they release statistics that specific. The closest I am aware of is the Filing Season Statistics.

If we look at the most recent data from July of this year, out of 141.3 million returns, 52.5 million of them didn't attach any additional Schedule (1 through 6), which would put an upper limit at 88.8 million. The "Total statutory adjustments" sits at 31.7 million, so that would be the lower limit of the number of people who filed a Schedule 1, since the Schedule 1 includes all details about adjustments.

However, that doesn't include people who filed a Schedule 1 to declare additional income or losses. For example, business net income/loss was 21 million returns, capital net income/loss was 20.7 million returns, and rental real estate etc. was 12 million returns. There is no breakdown of how many returns filed one or multiple of these, and how many returns filed for additional income as well as adjustments, so it is impossible to figure out the overlap between all these numbers.

So, at a roughly educated guess I would say maybe 40% of returns also filed a Schedule 1?

[DougM]

FYI
https://decrypt.co/40050/how-to-answer-the-crypto-question-on-the-irs-tax-form

How to Answer the Crypto Question on the IRS Tax Form
Answering the IRS’s crypto question on the new draft on its tax form is mandatory. Here’s how to handle it.

In brief
The IRS has a new draft tax form.
A question on that form makes it clear the agency wants to know about American taxpayers' cryptocurrency activity.
Tax filers must answer the question.

[OgNasty]

As others have stated, we had to answer this question last year.