Cryptocurrency Tax Confusion
In typical IRS fashion, the tax implementations on investing and trading in cryptocurrency are confusing going into the 2021 tax filing season.
The 2021 version of IRS Form 1040 asks if at any time during the year you received, sold, exchanged, or otherwise disposed of any financial interest in any virtual currency. If you did, you are supposed to check the “Yes” box on your Form 1040.
However the IRS further clarifies that you can check “No” in the box if: A transaction involving virtual currency does not include holding virtual currency in a wallet or account, or the transfer of virtual currency from one wallet or account that you own or control to another that you own or control.
Also check the “No” box if your only virtual currency transactions in 2021 were purchases of virtual currency for real currency, including the use of real currency electronic platforms like Paypal or Coinbase.
Either way you have to check the “yes” or “no” box if you file a Form 1040 in 2021.