The U.S. government, along with most governments, has invested resources in understanding cryptocurrency and is developing policies to deal with virtual currency. As of today, Bitcoin still remains the most invested virtual currency on the market with a market cap of approximately $200 billion.
For the 2019 taxation year, the Internal Revenue Service (IRS) has initiated a question on schedule 1 of the 1040 U.S. Individual Income Tax Return related to activities in virtual currencies. The question, which requires a “yes” or “no” answer, is as follows:
At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?
It is important to answer this question correctly. When you sign the 1040 U.S. Individual Income Tax Return, you are signing under penalties of perjury that, to the best of your knowledge, the return and accompanying schedules and statements are true, correct and complete.
It is very important to review any virtual currency transactions undertaken for 2019 to determine your reporting status on the 1040. Here is a link to some of the more notable virtual currencies from Wikipedia: https://en.wikipedia.org/wiki/List_of_cryptocurrencies.
Visit the IRS website for additional information regarding the taxation of virtual currencies in the U.S.: https://www.irs.gov/businesses/small-businesses-self-employed/virtual-currencies
For additional information, please contact your local Baker Tilly advisor.
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