Taxpayers, pay attention: IRS rules for digital asset income reporting are undergoing a slight update in 2023 for the 2022 tax year. Although the change revolves largely around terminology, keeping up with the current requirements is important to ensure you file your tax return correctly.
The digital asset question of 2022 vs. the previous tax year includes slightly different terms. While in previous years, this question referred to “virtual currencies,” in 2022, the IRS used the broader definition of “digital assets.”
This year, the 1040 digital asset question specifies what it means to “receive” digital assets. The IRS also added the term “gift,” which it didn’t include in 2021.
However, the gist of the question remains the same: You must declare any digital assets or cryptocurrencies that you received, sold, exchanged, gifted, etc. And yes, everyone must answer the question by checking either “Yes” or “No” in the relevant box.
The question appears on the following IRS forms:
By the IRS definition, digital assets include:
If you aren’t sure whether a specific asset counts as a digital asset, we suggest you consult a tax professional to avoid mistakes.
You would usually have to answer “Yes” to the digital asset question if you:
If you don’t own any digital assets, you’ll check “No” when you answer the digital asset question. You can also answer “No” to this question if your digital asset activities only included the following:
If you checked the “Yes” box, you must also provide a detailed report of your digital asset transactions during 2022. This applies to:
Use the IRS website to find the relevant digital asset form you must fill and file (Form 8949 and Schedule D for investors, Schedule C for independent contractors and traders, Form 709 for gifts, etc.)
It can be tricky to keep up with ever-changing tax regulations, including IRS rules for digital asset income reporting. Avoid tax pitfalls by working with Levy & Associates, a full-service tax consultancy with a team of tax attorneys, former revenue officers, and other tax professionals. We help you navigate complex tax requirements and resolve issues like audits, liens, levies, penalties, and more.
Call 800-TAX-LEVY today to learn more about our tax services.
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