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Tax Form Crypto Question Expanded by IRS to Include Gifts for 2022 Tax Return

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Indrani bose Follow

INDIA

Aug, 09 2022

Aug, 09 2022

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The crypto question on Form 1040, the tax form used by all U.S. taxpayers to file an annual income tax return, has been changed by the Internal Revenue Service (IRS). Recently, the Internal Revenue Service (IRS) released the draft of Form 1040 for the 2022 tax year. The tax form used in the United States to file individual income tax returns is called Form 1040. 


The IRS has modified its annual questions on Form 1040 once more related to bitcoin holdings and related gains. The IRS has made it clear related to "receiving" bitcoin includes earning digital assets through "rewards, awards, or remuneration" in the recently released draught of the 2022 individual income tax return, Form 1040. The organization also wants to know if taxpayers gave or received presents of cryptocurrency. The crypto question on Form 1040, the tax form. The Internal Revenue Service (IRS) released the preliminary version of Form 1040 for the 2022 tax year. 


"All taxpayers submitting Form 1040, Form 1040-SR, or Form 1040-NR must tick one box answering either 'Yes' or 'No' to the virtual currency inquiry," the IRS stated in a notice it published in March. Every taxpayer must respond to the question including those who transacted with virtual money in 2021. 


According to Canty, the question's general character may cause problems for those who lack knowledge. Demanding people to respond "yes" or "no" for a variety of frequently sophisticated digital asset trading scenarios may have a number of unforeseen implications, especially given the growing number of tax filers utilizing TurboTax or otherwise preparing their annual forms independently.  


According to the tax administration, taxpayers can check "no" if they only own bitcoin and have never transacted with it during the year. Additionally, the IRS explained that, if their activities were limited to holding or transferring cryptocurrency within their own wallets or accounts, they could check "no" if they bought cryptocurrency with real currency, including purchases through real currency electronic platforms such as PayPal and Venmo, or by holding, transferring, or purchasing virtual currency as described above. 


Schedule 1 forms first asked about crypto holdings in 2019 although it was not required for all taxpayers. In 2020 the IRS asked if taxpayers had sent any assets to different wallets or held any cryptocurrency on Form 1040, which are not intrinsically taxable actions. The IRS questioned taxpayers if they had "received, sold, traded, or otherwise disposed of any financial interest in any virtual currency" in 2021, taking it a step further. 

 


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Indrani bose

CBW - External Analyst

INDIA

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