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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 “again answer a digital asset question and report all digital asset-related income when they file their 2022 federal income tax return.”

“The question, which appears at the top of Forms 1040, Individual Income Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Income Tax Return, was revised this year to update terminology,” the government agency said.

They noted that the term “virtual currencies,” used on tax forms in 2021, has since been changed to “digital assets.”

The IRS also clarified the definition of a “digital asset,” which they noted “is a digital representation of value which is recorded on a cryptographically secured, distributed ledger.”

Digital assets are treated as property to the IRS and are not considered real currency, the agency said on its website.

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.

READ 17 COMMENTS
  • PJ Wray says:

    I have no digital currency. If people are using it to dodge their rightful income taxes, then I’m all for going after them. The scoff-laws make it worse for the rest of us!

  • ron says:

    Hmmmm. Digital assets. Well, I guess that means I have to tell them I own a computer and a printer, and some cartrdges.

  • ron says:

    Its the British owned IRS, actually collecting to Pay themselves Back the interest on the loans to our federal government. I’d like to see the document that gives them that authority to tax US citizens

  • I have a close friend who just resigned from the IRS. We are all aware of the new funding they were granted and we all need to take precautions. He was an auditor and resigned because they wanted him to arm himself. He says he’s an accountant and not a cop. He’s been aware of the extra dollars to add more people and he was told that if everyone paid their fair share of taxes there would be no deficit.
    The IRS is going to pay close scrutiny to all taxpayers. They’re even looking into Venmo and accounts like that.
    If you have not been paying taxes, or taking questionable deductions, get ready. They never forget.

  • Stewart Eckols says:

    screw the IRS..they were weaponized under Lehrner…they are part if the PROBLEM now.

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