Draft of IRS form asks taxpayers about cryptocurrencies on first page

Draft of IRS form asks taxpayers about cryptocurrencies on first page

Ignorance may no longer be bliss for US taxpayers when filing their returns next year.  The Internal Revenue Service has just released a preview of next year’s Form 1040 and it directly asks filers about cryptocurrencies. Form 1040 is the standard IRS tax form filed by US residents for their federal income tax.

In a draft released this week, taxpayers are asked a simple yes or no question, “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”  Not only is the question direct, but it is featured prominently on the first page right beneath the filer’s name and address.  Americas will find it difficult to ignore this question when it appears above the standard deductions, dependents, and income.

Although less than 10% of Americans use cryptocurrencies, tax experts estimate that only a fraction of those crypto users report their profits to the Internal Revenue Service.  If the draft of Form 1040 is implemented, US taxpayers will no longer be able to ignore their obligations.

The wording of the question on Form 1040 could alarm cryptocurrency users, as anyone who buys a $3 slice of pizza with bitcoin would be required to let the IRS know.  What’s more, failing to declare these types of transaction could have legal implications.

Before submitting Form 1040 each taxpayer must proclaim, “Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete.”

A draft of Form 1040 can be found at https://www.irs.gov/pub/irs-dft/f1040–dft.pdf. Please note that taxpayers should never use draft documents when filing their taxes.

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