IRS Tax Form Update – Virtual Currency
Please note, the IRS released an early draft Form 1040 for the 2019 tax year which contains a new item – 2019 Form 1040, Schedule 1, Additional Income and Adjustments to Income. The checkbox at the top of Schedule 1 asks taxpayers about their interests in virtual currency. Specifically, it states, “At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
The virtual currency issue is a pet project of the IRS, and they are taking steps to identify those with such accounts. If you have virtual currency, make sure to read the instructions and correctly complete this checkbox. If you had any virtual currency transactions, you need to file Schedule 1 and check the ‘Yes’ box even if you have no other reason to file Schedule 1.
As well, the IRS issued a new Revenue ruling earlier in October (link here Revenue Ruling 2019-24) providing guidance concerning the tax treatment of certain cryptocurrency events called “hard forks” and “airdrops”. If you have virtual currencies, you should make sure to read this ruling and understand the rules concerning these events, which can produce taxable income for US purposes.
Contact us if you have any questions.