It’s no secret, the IRS is very serious with its crackdown on virtual currency. In July, the agency started sending letters to taxpayers who may not have been in compliance with regard to their use of virtual currency. Things are heating up and there’s more to come.
The early release draft of the IRS Form 1040 for the 2019 tax year contains a brand new item (2019 Form 1040, Schedule 1, Additional Income and Adjustments to Income ). It is a checkbox right at the top of Schedule 1 asking taxpayers about their interests in virtual currency. Its language reads as follows “At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
Those with foreign financial accounts will see that this language closely mirrors that used on the Form which asks taxpayers if they have an interest in any foreign financial account. If the choice of language is any indication, I can foresee virtual currency becoming the next big tax and penalty jackpot for the IRS.
Be very careful with your 2019 tax return. If you have virtual currency, read the relevant instructions and make sure you do not miss the checkbox! If you had any transactions with respect to virtual currency, you need to file Schedule 1 and check the “YES” box even if you have no other reason to file Schedule 1. It looks like a trap for the unwary is on the way, because this point is not made clear unless you are diligent and (whew!) reach page 81 of the draft instructions. Hopefully, the IRS will fix this problem, (unless of course, it was put there intentionally to reap in greater penalty amounts)!
Posted October 14, 2019
All the US tax information you need, every week –
Just follow me on Twitter @VLJeker (listed in Forbes, Top 100 Must-Follow Tax Twitter Accounts 2017-2019).
Subscribe to Virginia – US Tax Talk to receive my weekly US tax blog posts in your inbox.
Visit my earlier US tax blog “Let’s Talk About US Tax” hosted by AngloInfo since 2011, it contains all my old posts. Some hyperlinks to my blog posts on AngloInfo may have expired. If you copy the expired URL, you can most likely retrieve the actual post by using the “Wayback Machine” which is an archiving service. Simply paste the URL into the Wayback Machine search box. It will show you the archived post was saved on a specific date. Click on that date to retrieve the post.