In October 2019, as part of a wider effort to assist taxpayers and to enforce the tax laws in a rapidly changing area, the Internal Revenue Service issued two new pieces of guidance for taxpayers who engage in transactions involving virtual currency. The new guidance includes Revenue Ruling 2019-24 and frequently asked questions (FAQs). It supplements the guidance the IRS issued on virtual currency in Notice 2014-21 that describes how virtual currency is treated for federal tax purposes.
In addition, the IRS has now issued the second early release draft of the 2019 Form 1040, Schedule 1, Additional Income and Adjustments to Income, which includes the following checkbox question:
At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency? ◊ Yes ◊ No
Taxpayers who file Schedule 1 to report income or adjustments to income that can’t be entered directly on Form 1040 should check the appropriate box to answer the virtual currency question. Taxpayers do not need to file Schedule 1 if their answer to this question is NO and they do not have to file Schedule 1 for any other purpose.
The related draft Form 1040 instructions, also now available on IRS.gov, include instructions to help taxpayers determine how they should answer this new question.