If you bought or sold cryptocurrency in 2019, the IRS would like to know about it.
This year, the tax agency has added a new question to the top of Form 1040 that was never there before: “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”
Over the past few years, the general attitude in the crypto community was that you could get away without disclosing crypto gains (or losses) on your taxes, since the process is confusing and the IRS’s stated guidelines and understanding of crypto limited.
But then in 2019 the IRS sent “educational letters” to more than 10,000 taxpayers “who may have failed to properly report virtual currency transactions.”
“The IRS is looking for people to self-report,” says Kathy Pickering, H&R Block’s chief tax officer. “They're looking for you to come forward, and they'll be more lenient, even if you don't get it right, if you're disclosing.”
Pickering also acknowledges that in the past, there’s not much information when it comes to how to report cryptocurrency holdings – “not a lot of support in that.” But she says H&R Block is seeing “a lot of interest in it” from customers, “and we’re ready to help.”
In September, after reports of the IRS letters about crypto sent to taxpayers, H&R Block posted a blog post, “IRS letters trigger anxieties on cryptocurrency,” offering help to customers who received such a letter.
H&R Block also reminds taxpayers, in guidelines sent to Yahoo Finance, that the taxes people will owe for cryptocurrency holdings “depends on how they use their cryptocurrency: as an investment, in their business, or as miners” and reiterates, “If a taxpayer purchases bitcoins for investment purposes, the tax treatment is similar to buying and selling stock.”
Daniel Roberts is an editor-at-large at Yahoo Finance and closely covers bitcoin and blockchain. Follow him on Twitter at @readDanwrite.