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Crypto 1040 Tax Return Question Has ‘Educational’ Role, IRS Says

Nov. 2, 2022, 5:49 PM

The cryptocurrency question on tax Form 1040 serves an “educational” function beyond its enforcement role and has resulted in exponentially more people reporting transactions, an IRS official said Wednesday.

The question was updated in August with more precise language about how taxpayers received their digital assets. Practitioners have been seeking more clarity on the yes-or-no question, which also asks whether the taxpayer sold, exchanged, or otherwise disposed of the assets.

“While the question is geared towards taxable transactions, it is also capturing nontaxable transactions,” said Ronald Goldstein, senior technician reviewer, income tax and accounting, in the IRS’s Branch 2.