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.