Have you been dabbling in cryptocurrency trading? The IRS is stepping up its efforts to provide guidance to taxpayers around cryptocurrency transactions and has enacted some new compliance measures.

On 2019 tax returns, the IRS will require taxpayers to check off a box if they engaged in any virtual currency transactions during the year. The question will appear on the Schedule 1, as follows: “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”

The IRS has confirmed that virtual currency is to be treated as a capital asset if it can be converted to cash. This means that capital gains rules apply to any gains or losses on the sale or transfer of virtual currency, and should be reported on a Schedule D.

Digital currency exchanges like Coinbase are now required to issue a 1099-K if there are at least 200 transactions with a total value equal to or exceeding $20,000 or gross proceeds that exceed the state’s threshold, which for most states is $20,000.  These are high thresholds, so the IRS is heavily relying on taxpayers’ complying on their own.  The gross proceeds threshold for MA residents, however, is much lower—at only $600.

The IRS has published a complete list of frequently asked questions regarding cryptocurrency at:


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