- The IRS has released a new 1040 tax return for US citizens.
- More than 150 million people use the form to pay their taxes.
- The first question on the form concerns virtual currency transactions.
The Internal Revenue Service (IRS) has released a new 1040 tax return for U.S. citizens and the first question on the form is about cryptocurrencies. The IRS requires all citizens who pay taxes to report whether they have sold, bought, traded, or acquired digital assets. Notably, the form in question is used by around 150 million people to pay their taxes.
The IRS began including a question regarding digital assets last year. However, the form question was used to report any “additional income and income adjustment”.
At any time in 2020, have you received, sold, sent, traded or otherwise acquired a financial interest in a virtual currency?
Some of the questions regarding the payment of taxes on cryptocurrencies remain unanswered. For example, does the IRS treat interest earned through decentralized funding (DeFi) the same as interest earned through centralized funding (CeFi)? Are utility tokens considered “virtual currencies”? Are PoS block rewards treated the same as BTC or should they be treated as dividend reinvestments? Nonetheless, the inclusion of a question relating to cryptocurrency on the first page of the main tax form indicates how important the sector is to regulators.