Individuals who only purchased cryptocurrency with U.S. dollars and other real currency in 2020 don’t need to disclose that to the IRS this filing season, the agency said in a recent update to its website.
The IRS announced its new position in its frequently asked questions on virtual currency transactions. Individuals who purchase cryptocurrency with another cryptocurrency still have to report their transactions to the agency.
The IRS began asking cryptocurrency users to disclose their transactions on their 2019 Individual tax returns.
The cryptocurrency question on the 2020 return asks taxpayers if they received, sold, sent, exchanged or otherwise acquired any financial interest in any virtual currency.
Some tax profesionals on Twitter complained the recent update on cryptocurrency purchases seems contradictory to the tax return question and will confuse taxpayers. Others welcomed the change, saying it provides more clarity.
Just a word of advice, even if you are not required to disclose your purchases, you might still want to keep a log with your purchase dates and cost basis for future reference.