IRS: Answer Digital Asset Question on 2023 Tax Returns

Report All Income, Even if Exempt from Tax

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WASHINGTON (2024) – The Internal Revenue Service (IRS) reminds taxpayers that they must answer a digital asset question and report all digital asset-related income when filing their 2023 tax returns.

This requirement has been in place since 2022, but the IRS is emphasizing it again this year to ensure compliance.

The IRS defines a digital asset as "any digital representation of value that is recorded on a cryptographically secured distributed ledger or similar technology."

This includes cryptocurrencies such as Bitcoin and Ethereum, as well as non-fungible tokens (NFTs).

Taxpayers must answer the digital asset question on their tax return if they engaged in any of the following transactions during the year:

• Bought or sold digital assets
• Received digital assets as payment for goods or services
• Mined digital assets
• Transferred digital assets to or from another person
• Or used digital assets to purchase goods or services

Taxpayers must report all digital asset-related income, even if it is exempt from tax.

This includes income from the sale of digital assets, rewards from staking or mining digital assets, and income from lending or borrowing digital assets.

The IRS has provided guidance on how to report digital asset transactions on tax returns.

Taxpayers can find more information on the IRS website at https://www.irs.gov/cryptocurrency.

Conclusion

By following these guidelines, taxpayers can ensure that they are compliant with the IRS and avoid any potential penalties.