The Internal Revenue Service (IRS) is making it harder for taxpayers to conceal cryptocurrency transactions — whether intentionally or not — by adding a new question about it near the top of the new Form 1040.
The form released last week asks: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” The only option is to mark yes or no.
If you answer inaccurately, you could find yourself in hot water with Uncle Sam who is rooting out tax evaders, tax professionals warned.
“When you sign the form, it’s under the penalty of perjury,” said Ryan Losi, a certified public accountant and executive vice president of PIASCIK, a tax firm. “The IRS is just gathering the data, changing the forms to expressly say you did or didn’t, and setting the trap, so in the coming years, the hammer can come down.”
- The IRS has put a question about cryptocurrency holdings on page one of 2020 tax returns that taxpayers are expected to answer accurately.
- If you had income from crypto — whether due to selling at a profit or receiving a digital asset for work performed — failure to report it could come back to bite you.
- “It could be a real tax mess for folks who try to hide crypto earnings from the IRS,” said certified financial planner Kathryn Hauer.