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IRS May Add Cryptocurrency Question to Income Tax Form

The measure is part of the government's efforts to make tax rules apply to virtual currency traders and get them to report their cryptocurrency income.

The Internal Revenue Service (IRS) is considering adding a question about cryptocurrency dealings to Form 1040 in 2020.

According to a draft posted on the agency's website, IRS is planning to put the question, "At any time during 2020, did you sell, receive, send, exchange or otherwise acquire any financial interest in any virtual currency?" on the top front page of the tax form. The taxpayers will have to answer, "Yes", or "No".

In late August, the IRS sent out warnings to digital currency holders, urging them to avoid underreporting profits obtained through cryptocurrency. Since blockchains, apart from other financial bodies, have not been subject to any tax reporting, the IRS has had difficulty tracking cryptocurrency-relations profits and indicating whether taxpayers had underreported them on purpose.

The agency expects citizens to inform them about their virtual income this year, although it had previously not been obligatory. Now, the cryptocurrency question would be placed at the top of the tax form so that it would be difficult for taxpayers to prove they "overlooked" it. Citizens will then be prosecuted if caught underreporting virtual profits.

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