The Internal Revenue Service explicitly asks taxpayers to disclose their cryptocurrency transactions on the newest tax form, making it easier for the federal government to tamp down on fraud or tax evasion later down the line.
“At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” the form, released last week, asks, with two options: yes or no.
The question about virtual currencies has been included in tax forms since 2014, as a disclosure that should be treated as property for tax purposes. Cryptocurrency sales or exchanges are taxed as a capital gain or loss, much like a stock or bond, and income from the currencies are also taxed.
But this year, the recently released Form 1040 has the question listed first, right below the taxpayer's name and address, indicating the spotlight the IRS has on cryptocurrencies.
The IRS has ramped up investigations on underreported cryptocurrency investments in recent years, even summoning digital currency exchange Coinbase and Bitstamp to release information about their investors' activity to glean information about underreported capital assets.
Amongst its high-profile cases include software mogul John McAfee, who was charged in October with alleged tax evasion using cryptocurrency.