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Tax season is still months away, but the IRS will want to know about your cryptocurrency holdings.
The IRS just released a new Schedule 1 for the 2019 tax season, spelling out the details on above-the-line deductions, including the tax break for student loan interest and health savings account contributions.
Eagle-eyed taxpayers will notice that the IRS threw in an extra question on the form: "At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?"
This is the agency's latest effort to gather additional information on taxpayers' virtual currency holdings.
See below for the form
"The biggest thing is that the IRS is asking this for a reason, and my question is how much have you increased your audit risk by checking 'Yes' in response?" asked Jeffrey Levine, CPA and director of financial planning at BluePrint Wealth Alliance in Garden City, New York.
The inquiry itself is a vague one, experts said.
"As a taxpayer myself, I find this question very frustrating because it isn't clear," said Sarah-Jane Morin, partner at Morgan Lewis in San Francisco.
Moving your own virtual currency from one crypto wallet to another, for instance, could be considered "sending," she said
"The most conservative approach that a taxpayer can take is to consider any interaction you've had with virtual currency and whether there's any way this can fall under this very broad list of what you could've engaged in during 2019," said Morin.
Indeed, the IRS has signaled that it would be taking a closer look at cryptocurrency.
Back in July, the agency announced it was sending letters to more than 10,000 taxpayers with virtual currency transactions who may have failed to report income and pay taxes owed.
Here are the tax basics on cryptocurrency.Varying tax treatments