Crytocurrency and the IRS

Mar 21, 2022

Have you see the virtual currency question at the top of your personal tax return for 2021?  It asks: “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

All taxpayers must check one box answering either “Yes” or “No” to the virtual currency question.

Taxpayers who merely owned virtual currency at any time in 2021 can check the “No” box when they have not engaged in any transactions involving virtual currency during the year, or their activities were limited to:

  • Holding virtual currency in their own wallet or account.
  • Transferring virtual currency between their own wallets or accounts.
  • Purchasing virtual currency using real currency, including purchases using real currency electronic platforms such as PayPal and Venmo.
  • Engaging in a combination of holding, transferring, or purchasing virtual currency as described above.

The list below covers the most common transactions in virtual currency that require checking the “Yes” box:

  • The receipt of virtual currency as payment for goods or services provided;
  • The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift;
  • The receipt of new virtual currency as a result of mining and staking activities;
  • The receipt of virtual currency as a result of a hard fork;
  • An exchange of virtual currency for property, goods, or services;
  • An exchange/trade of virtual currency for another virtual currency;
  • A sale of virtual currency; and
  • Any other disposition of a financial interest in virtual currency.

If you sold of any virtual currency that was held as a capital asset through a sale, exchange or transfer, they must check “Yes” and report it on Schedule D.

If you received any virtual currency as compensation for services, report the income on Schedule C.

Download Your FREE Tax Chart

You have Successfully Subscribed!

Download Your FREE Pension Chart

You have Successfully Subscribed!