March 4 2021

IRS Updates FAQs on Virtual Currency Transactions

Source: IBFD Tax Research Platform News

The US Internal Revenue Service (IRS) has released the updated Frequently Asked Questions on Virtual Currency Transactions (FAQs). The FAQs provide guidance for taxpayers who hold virtual currency as a capital asset.

The IRS updated the FAQs by adding Q5 to explain the question on virtual currency on page 1 of IRS Form 1040 (US Individual Income Tax Return) for 2020, which asks: "At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?"

The FAQs clarify that a taxpayer is not required to answer yes to the question if the taxpayer's only transactions involving virtual currency during 2020 were purchases of virtual currency with real currency.