17 Oct The Changing Landscape of Virtual Currency and the IRS
For the last decade, the IRS has been developing policies and tax laws regarding virtual currencies and cryptocurrencies, such as Bitcoin, Litecoin, and Ethereum. Recently, the IRS released a second early draft of the new Schedule 1 for the 2019 tax season’s 1040 form, which includes a question about a taxpayer’s involvement in these currencies. Requiring a response of “yes” or “no,” the question states, “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?” Taxpayers who answer “no” and otherwise don’t need a Schedule 1, are not required to file the Schedule 1 with their Form 1040.
Still a relatively new result of the Tax Cuts and Jobs Act, the IRS instituted Schedules 1 through 6 to help supplement the shortened for Form 1040. For 2019, this has been reduced to 3 schedules labeled Schedule 1 through 3. This early draft shows the government’s intent to regulate virtual currencies and enforce related tax laws. To help taxpayers and tax professionals in this process, the IRS has also released new guidance supplements to help navigate this changing landscape, including Revenue Ruling 2019-24 and Frequently Asked Questions on Virtual Currency Transactions