You should answer “no” if you have not engaged in any transactions involving virtual currency during the 2021 tax year, according to the IRS, or if your activities were limited to:
- Holding virtual currency in your own wallet or account.
- Transferring virtual currency between your own wallets or accounts.
- Purchasing virtual currency using real currency, including purchases using real currency electronic platforms such as PayPal and Venmo.
- Engaging in a combination of holding, transferring, or purchasing virtual currency as described above.
The following list covers the most common transactions in virtual currency that require checking the “yes” box on your 1040 forms, per the IRS:
- The receipt of virtual currency as payment for goods or services provided.
- The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift.
- The receipt of new virtual currency as a result of mining and staking activities.
- The receipt of virtual currency as a result of a hard fork.
- An exchange of virtual currency for property, goods, or services.
- An exchange/trade of virtual currency for another virtual currency.
- A sale of virtual currency.
- Any other disposition of a financial interest in virtual currency.
See IRS FAQs regarding the Virtual Currency Question - the rules are the same whether you file Form 1040, 1040-SR, or 1040-NR.
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