Bozo Tax Tip #3: Ignore Cryptocurrency!

Right underneath your name and address (and your spouse’s name) on Form 1040 is this question:

“At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

All taxpayers must answer this question.  The IRS is basically telling everyone, thou shalt report your cryptocurrency gains and losses. 

It’s clear the IRS means business.  Over the last few years the IRS has successfully enforced summonses against several US-based cryptocurrency exchanges. To date, most IRS enforcement efforts in cryptocurrency have been going toward the low-hanging fruit: individuals who have not reported their cryptocurrency. I do expect the IRS to start looking at auditing large users of crypto. Given Commissioner Rettig’s remarks on the Tax Gap, IRS management clearly believes that there’s a lot of tax dollars to be found in cryptocurrency.

There is one truism, though: If you don’t report your cryptocurrency gains (and losses), you’re violating the law. So if you need to take some time to figure it out before filing your 2021 returns, make an estimate of your gains (or losses) and file an extension. Or you can choose the Bozo behavior of ignoring your cryptocurrency.


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