You Can’t Hide in the Shadows: Crypto Transactions Are Reportable and Taxable

The 2022 Form 1040 asks: ”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)?” Later the IRS warns: “Do not leave the question unanswered. You must answer “yes” or “no” by checking the appropriate box.” If the answer is “yes,” the IRS will be looking whether you filed Form 8949 “Sales and Other Dispositions of Capital Assets” with your Form 1040. Form 1040 Instructions (page 15) indicate that “digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. If a particular asset has the characteristics of a digital asset, it will be treated as a digital asset for federal income tax purposes.” Mere purchase will not require a yes answer; sale will.

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