New from the IRS - if you *only* purchased virtual currency, you don't have to answer "yes" on tax form
Just saw this important update from the IRS regarding crypto reporting requirements. According to their Q5 guidance, if your only transactions involving virtual currency during 2020 were purchases of virtual currency with real currency, you are NOT required to answer "yes" to the Form 1040 question about virtual currency. This seems like a major clarification from how the question was worded originally. When I first read the question on Form 1040, it literally asked if I had "acquired" any virtual currency. Well guess what, BUYING is acquiring! But apparently the IRS doesn't see it that way? I was fully prepared to check "yes" since I bought some Bitcoin back in September, but now it looks like I can just mark "no" and avoid any potential extra scrutiny. Anyone else confused by this seemingly contradictory guidance? The question itself vs how they're now interpreting it just doesn't make logical sense to me. Had anyone else already filed assuming they needed to check "yes" if they only purchased crypto? Wondering if it's worth amending or just leaving it...
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Harold Oh
Tax professional here! This is actually a really important clarification from the IRS that helps a lot of taxpayers. You're right that the wording on Form 1040 can be confusing, but here's what's happening: The IRS is primarily concerned with tracking taxable events involving cryptocurrency - selling, trading, receiving as payment, mining rewards, etc. Simply purchasing crypto with USD doesn't create a taxable event, which is why they've clarified you don't need to answer "yes" in that scenario. For those who already filed and marked "yes" even though you only purchased crypto, there's generally no need to amend your return just for this. Checking "yes" when you could have checked "no" doesn't create any tax liability - it just indicates to the IRS you had some involvement with virtual currency. The question is really meant to flag accounts for potential review if you had taxable crypto events but didn't report them. For 2025 filing (2024 tax year), the IRS has actually revised the wording to be clearer about what activities require a "yes" answer.
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Amun-Ra Azra
•Wait so if I mined some ETH in 2020 but never sold any of it, do I need to mark "yes"? And do I need to report that somehow even though I didn't make any money from it yet?
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Harold Oh
•Yes, if you mined ETH in 2020, you definitely need to mark "yes" on the virtual currency question. Mining cryptocurrency is considered taxable income at the fair market value of the coins when you received them - even if you never sold them. You would need to report this mining income on your tax return, typically on Schedule C as self-employment income (which means you'd also potentially owe self-employment tax). The IRS treats the value of the mined coins as income on the date you received them, regardless of whether you converted them to cash.
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Summer Green
I went through this exact headache last month! After hours of research and confusion, I finally found a solution with https://taxr.ai that saved me so much time. I was totally confused about how to handle my crypto purchases from 2020-2024, especially with all these changing IRS rules about virtual currency reporting. They have this tax AI that analyzes all your crypto transactions and tells you exactly how to answer that virtual currency question on Form 1040. It even explained that simply buying crypto with USD isn't a reportable event, but selling, trading between different cryptos, or mining all require reporting. Their system parsed my entire transaction history and gave me crystal clear guidance that matched this IRS update.
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Gael Robinson
•Does it work with all the major exchanges? I've got accounts on Coinbase, Binance, and a couple smaller ones. Been a nightmare trying to track everything manually.
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Edward McBride
•Sounds interesting but do they actually help with the tax forms or just tell you what to do? I'm still confused about where mining income goes on the tax forms vs. capital gains from selling.
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Summer Green
•They support all the major exchanges including Coinbase and Binance, plus most of the smaller ones too. You can either connect your accounts directly or upload CSV files of your transaction history. I had accounts spread across three different exchanges and it consolidated everything perfectly. They actually provide both the advice and the completed tax forms. For mining income, they'll generate the Schedule C you need for self-employment income from mining activities. For any sales, they'll complete Form 8949 and Schedule D for your capital gains reporting. They break everything down by transaction type so you know exactly what's what.
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Gael Robinson
Just wanted to follow up about taxr.ai - I gave it a shot after seeing the comment here and wow, what a relief! I was seriously stressing about my crypto taxes with transactions spread across multiple platforms. The system automatically categorized everything - my purchases (which don't need reporting), my sales (capital gains), and even some random airdrops I got. It confirmed that I only needed to answer "yes" to the virtual currency question for the years I did more than just buying. For 2020 when I only purchased, it correctly advised marking "no" per this IRS guidance. Saved me hours of headaches and probably an expensive call to a tax professional!
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Darcy Moore
If you're having trouble getting answers directly from the IRS about crypto questions, I highly recommend using https://claimyr.com to actually get through to a human at the IRS. I spent WEEKS trying to get clarification about my specific virtual currency situation (had some weird DeFi transactions) and kept hitting automated systems and disconnects. Used Claimyr and got connected to an actual IRS agent in about 15 minutes who walked me through exactly how to report everything correctly. They have this cool system that navigates the IRS phone tree for you and calls you back when they have an agent on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c Ended up saving me from potentially misreporting my crypto transactions which could have triggered an audit.
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Dana Doyle
•Does this actually work? I've literally tried calling the IRS 9 times about a crypto question and either get disconnected or told the wait time is too long. How much does it cost?
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Liam Duke
•Sounds too good to be true. I've never been able to reach anyone at the IRS no matter when I call. And even if you do get them on the phone, do they actually know anything about crypto reporting? Most tax pros I've talked to barely understand it.
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Darcy Moore
•Yes, it absolutely works! I was just as skeptical as you after trying repeatedly to get through on my own. The system basically keeps dialing and navigating the IRS phone tree until it finds an available agent, then it calls you back when it has someone on the line. The IRS agent I spoke with was surprisingly knowledgeable about crypto. She wasn't a specialist, but she had access to their internal guidance on virtual currency reporting and was able to clearly explain how to handle my specific situation. She confirmed exactly what this post mentions - that simply purchasing crypto doesn't require answering "yes" to the question, but any sales, trades, or mining does.
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Liam Duke
OK I have to admit I was totally wrong about Claimyr. After seeing it mentioned here, I decided to give it a shot because I was desperate for answers about reporting some NFTs I sold last year. Got connected to an IRS rep in about 20 minutes, which is INSANE considering I had previously wasted hours trying to get through. The agent was super helpful and cleared up my confusion about the virtual currency question. He confirmed exactly what this thread is discussing - only buying crypto with USD doesn't require a "yes" answer, but my NFT sales definitely did. He walked me through exactly how to report the gains and which forms to use. Definitely worth it for the peace of mind knowing I'm filing correctly!
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Manny Lark
I think everyone's missing something important here... This guidance was specifically for 2020 tax returns. The IRS has changed the wording of the question multiple times since then. For your 2024 taxes (filing in 2025), the question is worded differently and you should carefully read the current instructions. The 2024 Form 1040 question specifically asks if you "disposed of any virtual currency" or "exchanged virtual currency for goods, services, or property" which is much clearer than previous versions.
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Rita Jacobs
•Do you know if staking rewards count as a "yes" for the new question wording? I've been staking some ADA and getting small amounts every few days.
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Manny Lark
•Yes, staking rewards absolutely count as a "yes" answer on the virtual currency question. The IRS treats staking rewards similar to interest income - you're receiving new cryptocurrency as a reward, which is considered taxable income when received. You'll need to track the fair market value of each staking reward at the time you received it and report the total as income. Most people report staking rewards either as "Other Income" on Schedule 1 or as business income on Schedule C if you're doing it as part of a business activity.
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Khalid Howes
Anyone know how this applies to getting free crypto from those Coinbase Learn rewards? I did a bunch of those quizzes and got like $30 worth of random coins. Is that considered "purchasing" or something else?
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Ben Cooper
•Those Coinbase Learn rewards are definitely NOT purchases! They count as income and you would need to mark "yes" on the virtual currency question. Basically anything where you RECEIVE crypto without directly buying it with USD (mining, staking, airdrops, rewards, etc.) is taxable income.
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