IRS may revise 1040 to coax taxpayers into reporting crypto transactions
Taxpayers who fail to pay taxes on virtual currency transactions may face penalties and interest
The IRS may update its Form 1040 to make sure all taxpayers who engage in cryptocurrency transactions report them.
A draft of the 2020 tax form includes a question asking taxpayers whether they have sold, received, sent, exchanged or otherwise acquired any financial interest in virtual currency during 2020 in a more visible position. Filers would be able to check either a yes or no box.
The adjustment was first reported by The Wall Street Journal on Friday, which noted the question was in a spot on the 2019 form that not all taxpayers had to fill out.
IRS UPDATES CRYPTOCURRENCY TAX GUIDANCE
The tax agency has been zeroing in on obligations owed from virtual currency transactions.
As previously reported by FOX Business, the IRS issued guidance earlier this month clarifying how cryptocurrencies are treated for tax purposes when they are received in exchange for certain services. It released a memorandum stating that an individual who receives digital currency through a crowdsourcing platform in exchange for providing a service should report the convertible virtual currency as ordinary income.
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Last year, it sent letters to 10,000 taxpayers who may have had tax liabilities.
Under current U.S. tax laws, cryptocurrencies are treated like property.
Taxpayers who fail to pay the taxes they owe on their virtual currency transactions can be subject to penalties and interest – in more serious cases even criminal prosecution.