New IRS Requirement Now Applies: ‘All Taxpayers Must Answer the Question’

The Internal Revenue Service has issued a reminder to taxpayers, notifying them that when they file their taxes for 2022, they must report all their digital assets. In a Jan. 24 update , the IRS instructed taxpayers to…

IJR SyndicatedFeb 6, 20233 min read

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Common digital assets listed by the IRS include, but are not limited to — convertible virtual currency and cryptocurrency, stablecoins, and non-fungible tokens (also known as NFTs).

“In addition, the instructions for answering the question were expanded and clarified to help taxpayers answer it correctly. All taxpayers must answer the question regardless of whether they engaged in any transactions involving digital assets.”

The question on the 2022 tax form now reads: “At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”

Every taxpayer, even those who don’t have any digital assets, “must answer the question” with either a “Yes” or “No,” the agency said.

According to the IRS, “Normally, a taxpayer must check the ‘Yes’ box if they:

“Received digital assets as payment for property or services provided;
Transferred digital assets for free (without receiving any consideration) as a bona fide gift;
Received digital assets resulting from a reward or award;
Received new digital assets resulting from mining, staking and similar activities;
Received digital assets resulting from a hard fork (a branching of a cryptocurrency’s blockchain that splits a single cryptocurrency into two);
Disposed of digital assets in exchange for property or services;
Disposed of a digital asset in exchange or trade for another digital asset;
Sold a digital asset; or
Otherwise disposed of any other financial interest in a digital asset.”

Taxpayers who didn’t engage in any transactions involving digital assets in the last year should answer the question with “No.”

The IRS listed several other examples of when taxpayers should check “No,” such as when they are simply:

“Holding digital assets in a wallet or account;
Transferring digital assets from one wallet or account they own or control to another wallet or account they own or control; or
Purchasing digital assets using U.S. or other real currency, including through electronic platforms such as PayPal and Venmo.”

The IRS also detailed other requirements for taxpayers or investors who have “held a digital asset as a capital asset and sold, exchanged or transferred it,” and noted that employees or independent contractors must report digital assets as part of their income.

This article appeared originally on The Western Journal.