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The IRS moves the crypto tax question to the top of Form 1040.

The US Justice Department revealed that it seized more than $3.6 billion worth of Bitcoin that was stolen during the 2016 cry
The US Justice Department revealed that it seized more than $3.6 billion worth of Bitcoin that was stolen during the 2016 crypto exchange Bitfinex hack.

Last year the Internal Revenue Service (IRS) indicated it wanted to know who dealt or held cryptocurrency by asking taxpayers directly on their 1040A forms. Now, the tax agency has made that form-based question much more prominent to ensure everyone answers. The IRS formally moved a question — “At any time during 2020, did you receive, sell, or otherwise acquire any financial interest in any virtual currency?” — to the 1040 form.

“The IRS is on top of crypto.”

The crypto tax question now sits at the top of the form, right below the boxes that ask for identification. Crypto tax professionals say if it wasn’t clear the IRS meant business before, it’s crystal now. Joey Ryan, CFO at crypto accounting firm Gilded, said it shows the IRS is on top of crypto, maybe even more on than some would expect. The IRS has effectively moved the question so that it will be required reporting for all taxpayers moving forward since most taxpayers fill out Form 1040. This move is expected to increase the compliance rate, catching any stragglers who weren’t as aware of crypto tax burdens.

There are concerns about the wording of the question.

Joey Ryan stated, “If some people weren’t paying attention or not as fully kind of involved in what the IRS has been doing, they might not have known to look at the Schedule 1, which is kind of your extra income schedule, but now it’s just sitting right on the face of form 1040 so nobody kind of has a chance to miss that question or not understand kind of what is happening.” Some tax professionals have raised concerns to the US tax agency about the wording of the question, as it’s unclear if buying or holding qualifies as transacting in crypto.

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