Yes, cryptocurrency transactions are indeed reported to the Internal Revenue Service (IRS). Here are the key points you should be aware of:
Reporting Requirement
- Taxpayers must continue to report all cryptocurrency and digital asset income when filing their federal income tax returns.
- This requirement applies to the 2023 tax year and beyond, similar to how it was done for the 2022 tax returns.
- The digital asset question appears at the top of various tax forms, including Forms 1040, 1040-SR, 1040-NR, 1041, 1065, 1120, and 1120S.
- The question asks whether the taxpayer received or disposed of digital assets during the year.
- Digital assets include convertible virtual currency, cryptocurrency, stablecoins, and non-fungible tokens (NFTs).
Who Must Answer the Question
- All taxpayers who file the specified forms must answer the digital asset question.
- It’s not limited to those who actively engaged in digital asset transactions during the year.
When to Check “Yes”
- should check the “Yes” box if they:
– Received digital assets as payment for property or services.
– Received digital assets resulting from rewards, awards, mining, staking, or hard forks.
– Disposed of digital assets (e.g., sold, exchanged, or traded them).
– Held a financial interest in digital assets.
Reporting Digital Asset Income
- In addition to checking the “Yes” box, taxpayers must report all income related to digital asset transactions.
- For example, if you sold a digital asset, you’ll need to calculate capital gains or losses using Form 8949 and report it on Schedule D (Form 1040).
Remember that crypto transactions are subject to taxation, and failing to report them accurately could lead to an audit. So, it’s essential to stay informed and comply with IRS guidelines.