When you file your taxes this year, the Internal Revenue Service will ask you a simple question: “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?” It’s pretty simple, just yes or no, right? What could go wrong? It’s not really asking for numbers or any detail, though if you sold some it should go elsewhere on your tax return. After all, since the IRS classifies crypto as property, any sale is going to produce either a gain or loss.
Perhaps the IRS is just surveying who is using crypto, you might guess? Not necessarily, and a simple yes or no box can turn out to be pretty important. In fact, given the IRS’s track record with offshore bank accounts, it could even mean big penalties or even jail.
Related: Crypto Tax Reporting Failures Can Be Expensive, Even Criminal
The new IRS question appears at the top of Schedule 1 of your 2019 Form 1040. It explicitly asked if you received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency at any time during the year. Tax-savvy people will probably recognize that this is quite reminiscent of the foreign bank account question included on Schedule B.
That is, the question could even set you up as committing perjury for checking the wrong box. Thus, if a taxpayer answers “no” and then is discovered to have engaged in transactions with cryptocurrency during the year, the fact that they explicitly answered no to this new question (under penalties of perjury) could be used against them. So, if you did any of the listed things, you check yes, right?
Related: Crypto IRS Audits: Hire Professionals or Do It Yourself?
What if you just have a kind of “signature authority” over crypto owned by your non-computer-savvy parents or other relatives? That way, you can help them manage their crypto. If you sell a parent’s crypto on their behalf, at their request and/or for their be...