2019 Tax Form 1040 Adds Question On Cryptocurrency Transactions, Bitcoin Buying Now Taxable? – International Business Times

KEY POINTS

The recently released progress update by the IRS noted that the 2019 Tax Form 1040 includes inquiry about owning cryptocurrencies. Still, it only managed to offer additional questions to crypto holders since the federal agency for revenue service only provided moreclarity last month to the originalNotice 2014-21issued in 2014.

With the modified Form 1040, the IRS wants to know if taxpayers had acquired or disposed of any cryptocurrencies (or what they termed as "virtual currency") in 2019. Schedule 1 of form 1040 asks: "At anytime during 2019, did youreceive,sell,send,exchange, or otherwise acquire any financial interest in any virtual currency?"

The word "exchange" in this question is what caused some of the confusion in the crypto community as that would mean that transferring a cryptocurrency like Bitcoin (BTC)to another wallet will be taxable, as Daniel Roberts of Yahoo Finance points out.

The government agency's answer to this is, "No. If you transfer virtual currency from a wallet, address, or account belonging to you, to another wallet, address, or account that also belongs to you, then the transfer is a non-taxable event, even if you receive an information return from an exchange or platform as a result of the transfer."

Questions like this surface because of how the IRS defines cryptocurrencies, and it's not currencies but rather property, much like stocks where capital gains (or losses) should be reported. The 45-FAQspublished on the federal agency's website offer some elucidation, answering questions for instances whencryptocurrencies are received asgifts and or when it is exchanged for properties.

Another uncertainty that perhaps irked some crypto owners was brought about by Rev. Rul. 2019-24 which concerns hard forks. This additional guideline for cases where there's a split in the chain warrants the crypto user to pay taxes nonetheless -- even if the user has no intention of utilizing the forked coins.

Roberts notes that in the past, a different measure was taken by most cryptocurrency owners. Since disclosing crypto gains doesn't offer much incentive and risks getting an audit, crypto holders shun it aside as something that would go unnoticed. But the new steps by the IRS indicate that they're honing on cryptocurrency holders and they're more committed to taxing crypto transactions.

Litecoin, ripple and ethereum cryptocurrency 'altcoins' sit arranged for a photograph. Germany is investigating the use of blockchain, the tech that underpins cryptocurencies. Photo: Jack Taylor/Getty Images

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2019 Tax Form 1040 Adds Question On Cryptocurrency Transactions, Bitcoin Buying Now Taxable? - International Business Times