Cryptocurrency / Digital Assets
For a few years now, various U.S. tax forms have included a question about cryptocurrency and other digital assets. This question must be answered by all taxpayers, regardless of whether they bought or sold any during the current tax year (aka previous year).
The question asks if, during the current tax year, you received, sold, exchanged, or disposed of any cryptocurrency or digital assets. These are defined as digital representations of value recorded on secure, distributed ledgers. Common examples include virtual currency, cryptocurrency, stablecoins, and NFTs.
You must answer “Yes” if you received digital assets as wages, payment, rewards or awards. Also aswer yes if you mined or staked new new ones, received them from a hard fork, disposed of them in exchange for property or services, sold them, or had any financial interest therein.
Those who answer “Yes” must report all income related to their digital asset transactions. This includes capital gains or losses on sales or exchanges, reported on Form 8949 and Schedule D (for capital gains and losses), and other related income sources. A taxpayer who disposed of any by gift may be required to file IRS Form 709.
If you held digital assets in 2023 without engaging in transactions, you can check “No” on the question. This applies to those who simply held assets in a wallet, transferred assets between their accounts, or purchased assets with real currency.
In summary, taxpayers must report digital asset-related income accurately by answering the question and following appropriate reporting procedures, depending on their digital asset activities.
Learn more on the IRS Digital Assets page.