New Schedule 1 now requires taxpayers to respond to their cryptocurrency activity.
The IRS just released a new Schedule 1 for the 2019 tax season asking every taxpayer about their cryptocurrency activity. Specifically, the form requires taxpayers to respond to the following question: “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency.”
Signalling increased enforcement, the IRS included this question to all taxpayers at the top of the Schedule 1, directly under the taxpayers name. Taxpayers are advised to answer honestly because failure to comply can be costly because the IRS will now know if the taxpayer was engaging in wilful tax evasion. In extreme cases, taxpayers can face prison time and a fine up to $250,000.
The IRS is expected to look at the responses of taxpayers who traded cryptocurrency to see if they filed an IRS 8949 cryptocurrency tax form. Taxpayers are required to file an IRS 8949 tax form if they sold or traded cryptocurrency at any time during the year. If a taxpayer answers “Yes” to trading cryptocurrency, but fails to file an IRS 8949 tax form, then the taxpayer will likely face a costly audit.
TaxBit automatically generates the necessary IRS tax forms for cryptocurrency traders. Users can quickly link their exchanges via “read only” API’s, run all their transactions through the U.S. tax code as it applies to cryptocurrency, and auto generate their IRS 8949 cryptocurrency tax forms. Users can also see their real-time taxes throughout the year as they trade, as well as other trading metrics. TaxBit was founded by tax attorneys, CPA’s, and software developers. TaxBit complies with IRS regulations and allows crypto traders to continue to trade cryptocurrency without the worry of repercussions.
-Written by Cryptocurrency Tax Attorney Justin Woodward