The IRS has slightly changed the wording of the infamous virtual currency question on the draft 2021 Form 1040 published on July 21, 2021. The revised question only inquires about your taxable transactions compared to the much broader scope of the 2020 version.
The 2020 question reads, “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?"
The 2021 question reads, "At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in VC?"
There are a couple of changes in the 2021 version. First, the IRS has removed the “send” piece from the 2020 version. Second, “acquire any financial interest” has been replaced with “disposed of any financial interest”.
Although these changes have no big impact on your taxes, it hints at what the IRS has learned from the 2020 version and the direction it’s heading. At a high level, it looks like the IRS has narrowed down the scope of the 2020 question to capture information about taxpayers only with taxable cryptocurrency transactions. Under the revised question, you don’t have to check “Yes” if you send cryptocurrency in between wallets/exchanges or acquire them, which are both non-taxable transactions.
The 2021 Form 1040 is expected to go through several iterations before being finalized.
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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.