Posted on 01/26/2023 6:38:26 PM PST by SeekAndFind
The Internal Revenue Service (IRS) issued an alert to taxpayers on Tuesday, reminding them that they must report all digital asset-related income and answer a new digital asset question on their 2022 federal income tax return or face consequences such as delayed refunds or even penalties.
The IRS said in a Jan. 24 release that a key change on 1040 forms this year is that the agency has replaced the term “virtual currency” with “digital assets,” in addition to some other modifications to the wording.
The “Yes” or “No” question, which was expanded and revised this year to update terminology, reads as follows:
“At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
The question appears at the top of tax forms 1040, Individual Income Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Income Tax Return.
“All taxpayers must answer the question regardless of whether they engaged in any transactions involving digital assets,” the agency cautioned.
It is a legal requirement to accurately report all income, including income from digital assets, on federal income tax returns. Failure to do so could result in non-compliance with tax laws and possible penalties.
The IRS has provided a detailed explanation of what constitutes a digital asset, which includes such things as stablecoins, non-fungible tokens (NFTs), and cryptocurrencies.
Taxpayers need to check the “Yes” box if they:
Those who tick the “Yes” box must also report all income related to their digital asset transactions on relevant forms. For instance, an investor who sold cryptocurrency during 2022 would use Form 8949, Sales and other Dispositions of Capital Assets.
Taxpayers should check the “No” box if they merely owned digital assets but didn’t engage in any transactions involving them in 2022.
They should also tick “No” if they merely transferred digital assets from one wallet or account they own or control to another one that they own or control, and if they bought digital assets using real currency like the U.S. dollar.
The IRS has warned that many taxpayers should expect a smaller refund this tax season because of tax law changes including the expiration of pandemic-related stimulus payments that would otherwise have boosted refund balances.
“Due to tax law changes such as the elimination of the Advance Child Tax Credit and no Recovery Rebate Credit this year to claim pandemic-related stimulus payments, many taxpayers may find their refunds somewhat lower this year,” the IRS said in a press release on Jan. 23, the day the agency began tax returns for 2022 earnings.
Not all tax filers will see lower refunds as individual circumstances vary; many will see smaller checks.
The Recovery Rebate Credit was a way for millions of Americans to receive pandemic support if they did not receive their full amount via stimulus checks.
This credit was available for missing amounts from the first, second, and third round stimulus checks, and could only be claimed on 2020 and 2021 tax returns.
The stimulus checks were discontinued in December 2021 and the missing third-round amounts could only be claimed on a 2021 tax return filed in 2022.
However, people who may have missed the opportunity to claim missing third-round stimulus payments can review their 2021 tax return and consider filing an amended return.
The Child Tax Credit (CTC) for 2022 tax returns has been reduced to $2,000 per child, down from the expanded amount of $3,600 for children under 6 and $3,000 for children between 6 and 17 in 2021.
Some taxpayers may be eligible for an Additional Child Tax Credit (ACTC), which would allow them to receive up to $1,500 of the CTC as a refund on their tax return.
Also, a tax credit that working parents can use to help cover child care costs or that people with adult dependents can use for the same purpose is lower in 2022.
Read more here...
RE: BTW - I always file a paper tax return. IRS hates me.
AS long as it is LEGAL, I don’t see why you should stop. Make them work extra hours. :)
As Nancy Reagan would say, “Just say no.”
The Fair Tax does not promote domestic industry the way a tariff does.
Taxation is theft by government.
It’s gotta be better than a digital exam.
You also have to check the “I am vaccinated” box or face a $10,000 fine
Digital assets...like the dollar?
Whew!
Upon first read of the title, I thought that we were going to have to answer a question as to whether we contribute to, or believe in, FreeRepublic...
What a relief... I do not do anything related to digital asses...
There’s nothing quite like a fist to your digital assets.
They can come collect that one in person.
If they’re after all that gold my World of Warcraft hero accumulated they can just go after him themselves. Hint: he has a battle axe.
Exactly, a refund means you gave the government an interest-free loan.
ive never collected a refund
A middle finger?
“If anyone wants to yell at me for not paying them, do it. :)”
From the IRS site:
Rewards
To claim a reward for information about tax fraud, use Form 211, Application for Award for Original Information PDF.
I believe it’s crypto.
Coins are all that I am aware of, but NFTs may also fall
under this category.
My crypto went down this year.
According to the IRS's new definition, they sound more like "digital assets" than "currency."
Regards,
Regards,
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