Guide: How to correctly answer cryptocurrency question in TurboTax when filing Form 1040

Okay folks, I wanted to share my experience with answering the cryptocurrency question in TurboTax when filing my 2024 taxes. I know this trips up a lot of people who only purchased crypto last year but didn't do anything else with it. Here's the situation: I bought some Bitcoin and Ethereum in early 2024 using my regular bank account. I did NOT sell any of it, didn't exchange between different cryptocurrencies, didn't receive crypto as payment, didn't gift any, and didn't use it to buy anything. Literally just bought and held. When I got to the cryptocurrency question in TurboTax while preparing my 2024 Form 1040, I wasn't sure how to answer it. The question asks something like "At any time during 2024, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?" Initially, I thought I should answer "Yes" since I had acquired crypto, but after researching, I found out that ONLY PURCHASING crypto with real currency (USD) is NOT considered a reportable transaction. So I answered "No" to this question. Just wanted to pass this along since it seems to confuse a lot of people. If all you did was buy crypto with USD and hold it, you should answer "No" to this question. If you did anything else with it (sold, exchanged, received as payment, etc.), then you need to answer "Yes" and report it properly.

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19 comments

Mei Lin

•8M

Tax professional here. This is absolutely correct information. The IRS has clarified that simply purchasing virtual currency with real currency (like USD) is NOT a reportable transaction for purposes of the cryptocurrency question on Form 1040. The question is specifically asking about receiving, selling, exchanging, or otherwise disposing of cryptocurrency. If you merely purchased crypto with US dollars and held it (without selling or exchanging it for other crypto or goods/services), you should answer "No" to this question. However, be aware that if you did ANY of the following, you must answer "Yes": - Sold crypto for USD or other currency - Exchanged one type of crypto for another (like Bitcoin for Ethereum) - Used crypto to purchase goods or services - Received crypto as payment for goods or services - Received crypto through mining or staking - Received crypto through an airdrop or hard fork The key distinction is whether you had a potentially taxable event. Simply buying and holding doesn't create a taxable event.

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Mei Lin

•8M

Answering "yes" when you only purchased crypto isn't necessarily going to trigger an audit or get you in trouble. It's actually an over-disclosure rather than an under-disclosure, which is generally less problematic. If you answer "yes," TurboTax will simply prompt you to enter information about your crypto transactions. Since you didn't have any reportable transactions, you wouldn't have anything to enter, and you could still complete your return correctly without reporting any taxable events.

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GalacticGuru

•8M

This is exactly what I needed! I've been using taxr.ai (https://taxr.ai) to help me figure out my crypto taxes this year, and they confirmed the same thing. Their system actually detected that I only purchased crypto with USD and told me to answer "No" to the question. The tool saved me hours of stress trying to figure out if my Coinbase purchases were reportable. It basically scanned my transaction history and sorted everything into taxable vs non-taxable events. Found out my simple buy-and-hold strategy meant I didn't have any taxable events to report!

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GalacticGuru

•8M

It works by analyzing your transaction history from various crypto platforms. You can either connect it directly to major exchanges like Coinbase, Binance, etc., or upload CSV files if you prefer. It took me about 10 minutes to link my accounts and then it processed everything automatically. The accuracy has been solid for me. It's specifically designed for tax compliance and uses the latest IRS guidelines. What impressed me was how it identified which transactions were taxable events versus which ones weren't. It even caught a crypto-to-crypto exchange I had forgotten about that would have been taxable.

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Giovanni Mancini

•8M

Alright, I decided to try taxr.ai based on the recommendation here. I was super skeptical at first because my crypto situation is complicated (multiple exchanges, some DeFi stuff, a few NFTs). But I'm actually shocked at how well it worked! The system accurately identified which transactions were taxable and which weren't. The biggest surprise was discovering I had a small taxable event from an NFT I completely forgot about. It would have been a nightmare trying to figure all this out manually. The tool generated all the forms I needed for my tax return and explained exactly how to answer the cryptocurrency question on Form 1040. Saved me from potentially making a big mistake.

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Fatima Al-Suwaidi

•8M

If you're still having trouble with the IRS cryptocurrency questions or need clarification directly from the IRS, I highly recommend using Claimyr (https://claimyr.com). I spent weeks trying to get through to the IRS about a specific crypto reporting question and kept hitting busy signals or disconnects. Claimyr got me connected to an actual IRS agent in about 20 minutes when I had been trying for days on my own. They have this system that basically waits on hold for you and calls you back when an agent is on the line. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed exactly what OP said - simply purchasing crypto with USD isn't a reportable transaction. But she also helped me understand how to report some staking rewards I had received, which definitely needed to be included.

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Fatima Al-Suwaidi

•8M

It's actually pretty straightforward - they use an automated system that continually redials and navigates the IRS phone tree until it gets through. There's no special access or relationship with the IRS. It's just technology doing the tedious part that most of us don't have the patience for. They don't replace the actual conversation - you still talk directly to the IRS agent yourself. They just handle the waiting and getting through part, then call you when an agent is actually on the line. That's why I found it helpful during tax season when wait times can be 2+ hours.

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Sofia Morales

•8M

Ok I have to admit I was wrong about Claimyr. After posting my skeptical comment, I was still struggling to get clear info about reporting some crypto mining income, so I gave it a shot. I figured if it didn't work I could just dispute the charge. It got me through to an IRS rep in about 35 minutes when I'd been trying for literally 3 days on my own. The agent walked me through exactly how to report my mining income on Schedule C and clarified that yes, I definitely needed to answer "Yes" to the crypto question since mining creates taxable income. For anyone with complicated crypto tax questions, being able to actually speak with the IRS directly is invaluable. Definitely worth it during tax season when it's nearly impossible to get through otherwise.

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Zainab Mahmoud

•12h

Great breakdown, Jamal! This is super helpful timing since I'm about to start my 2024 taxes. I've been sitting on some Bitcoin and Dogecoin I bought last spring and had no idea how to handle that cryptocurrency question. One thing I'd add for anyone reading - make sure you keep good records of your purchase dates and amounts even if you're just buying and holding. I learned this the hard way when I couldn't find my Coinbase statements from early 2024. Even though I didn't have reportable transactions this year, having that documentation will be crucial if/when I do decide to sell in the future for calculating capital gains. Also, does anyone know if the rules are the same for crypto you receive as gifts? My brother sent me some Bitcoin for my birthday but I didn't do anything with it.

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