IRS Crypto

Do I Need to Answer Yes to the IRS Crypto Question? If you touched cryptocurrency during the year, it’s likely you will need to check “yes” to the IRS crypto question. Holding is virtually the only cryptocurrency activity that’s not specifically mentioned in the question—and therefore does not require you to check “yes.” However, be mindful that if you received any airdrops, that is considered “acquiring financial interest in virtual currency”; in this case, you must answer “yes” and report the airdrop(s) as income. All the following activities are considered a sale of the crypto, which would require you to answer “yes” to the crypto question: Exchanging cryptocurrency for USD/fiat Exchanging one type of coin for another Purchasing goods or services with cryptocurrency Read our cryptocurrency tax FAQ to learn more about reporting and why these activities are taxable transactions. Please note that, question or no question, reporting cryptocurrency income or gains has always been required by law. Update March 4, 2024: The IRS released new guidance stating: “If your only transactions involving virtual currency during 2023 were purchases of virtual currency with real currency, you are not required to answer yes to the Form 1040 question.” However, risk-averse taxpayers may still want to include a full report. Please contact our cryptocurrency tax lawyers to discuss the pros and cons of answering “No” to the crypto question.