What does the IRS really want to know about cryptocurrency?

The IRS really wants to know about your cryptocurrency. For tax year 2020 the IRS moved the cryptocurrency question from Schedule 1 of the Form 1040, where it was in 2019, to the much more prominent position of Page 1 of the Form 1040 itself. The question is the second piece of information requested, right after the taxpayer’s name and address.

How does the IRS interpret virtual currency?

The new draft instructions explain how the IRS interprets virtual currency. “The IRS uses the term “virtual currency” to describe the various types of convertible virtual currency that are used as a medium of exchange, such as digital currency and cryptocurrency”

Does a pass-through entity need to check “Yes” for bitcoin?

For example, we still don't know whether a taxpayer who owns bitcoin through a pass-through entity needs to check “yes” for the question. The “ financial interest ” portion of the question is still subject to interpretation.

Do I have to answer “yes” to the virtual currency question?

When you must answer “yes” to the virtual currency question You will still have to check "yes" if you have come across following situations in the tax year: Received crypto (include from an airdrop or hard fork) Sold crypto for fiat (ex:- cashing out bitcoin on Coinbase)