Understanding Digital Asset Reporting and Tax Requirements

As reported via IRS Tax Tip 2023-45  on 4/5/2023

All taxpayers that filed a 2022 tax year Forms 1040 and 1040-SR were required to check a box indicating whether they received digital assets as a reward, award or payment for property or services or disposed of any digital asset that was held as a capital asset through a sale, exchange or transfer.

Examples of digital assets transactions include:

  • A sale of digital assets.
  • The receipt of digital assets as payment for goods or services provided.
  • The receipt or transfer of digital assets for free, without providing any consideration, that does not qualify as a bona fide gift.
  • The receipt of new digital assets as a result of mining and staking activities.
  • The receipt of new digital assets as a result of a hard fork.
  • An exchange of digital assets for property, goods or services.
  • An exchange or trade of digital assets for another digital asset(s).
  • Any other disposition of a financial interest in digital assets.

Reporting digital assets transactions

  • If the “yes” box is checked, taxpayers must report all income related to their digital asset transactions.

 

The Instructions for Form 1040 and 1040-SR and the IRS Digital Assets page have more information.

(This is Blog Post #1489)