Do I have to answer IRS crypto question? The IRS has issued a warning about how to answer the cryptocurrency question on the front page of your tax return. You’ll need to respond to a yes-or-no question about virtual currency, regardless of whether you “engaged in a transaction” in 2021, according to the agency.
How do you answer cryptocurrency question on 1040? All taxpayers filing Form 1040, Form 1040-SR or Form 1040-NR must check one box answering either “Yes” or “No” to the virtual currency question.
Why does the 1040 Ask about cryptocurrency? The IRS reminds all taxpayers that they must answer the virtual currency question on Form 1040, 1040-SR, or 1040-NR for tax year 2021. If you sell or exchange virtual currency or use it to pay for goods or services or hold it as an investment, there may eventually be tax consequences that could result in tax liability.
What happens if I don’t report crypto to IRS? While the IRS views crypto as property rather than cash, American expatriates still must report foreign-held or -acquired cryptocurrency over a certain amount. Like many other tax requirements, failure to report your crypto gains on Form 8938 can result in hefty fines from the IRS.