The Internal Revenue Service (IRS) has reminded taxpayers that they must report their crypto income when filing their 2022 federal income tax return.

The Internal Revenue Service (IRS) has issued a reminder for taxpayers to disclose all digital asset-related income on their 2022 federal income tax return, similar to the process in 2021. The term “digital assets” replaces the previous term “virtual currencies.” IRS updated the question (found at the top of Forms 1040, 1040-SR, and 1040-NR) to reflect the new terminology. They also “expanded” instructions to provide more clarity.

All taxpayers need to answer the question regardless of whether they have engaged in any digital asset transactions. The question asks: “During 2022, did you: (a) receive digital assets as payment for property or services; or (b) sell, exchange, gift, or dispose of a digital asset or financial interest in a digital asset?”

A digital asset is defined as a “digital representation of value recorded on a secure and distributed ledger.” Examples of digital assets include cryptocurrencies and non-fungible tokens (NFTs), and stablecoins.

Taxpayers must check either “Yes” or “No” to the digital asset question on their Form 1040, 1040-SR, or 1040-NR. Taxpayers must also report any income related to digital asset transactions.

An employee paid in digital assets must report the value as wages. Independent contractors paid in digital assets must report the income on Schedule C.

Taxpayers who only held digital assets and did not engage in any transactions in 2022 can check the “No” box. IRS stated that this also applies to individuals who transferred crypto from one wallet or account they own to another, or who purchased digital assets using real currency.

The post IRS Lists Requirements to Report Crypto Income appeared first on Crypto Academy.

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Filed under: Bitcoin - @ January 28, 2023 9:56 pm