Virtual Currency - Should I answer "No" to the crypto question on Form 1040 if I just purchased Bitcoin and did NOT sell, exchange or do anything with it? purchase ONLY.

[Nan2C]

both of the links above bring a 404 error.

[Nan2C]

Thinking ahead to 2022 taxes.  If I purchased bitcoin through PayPal and do not use, or sell it, how should this question be answered.  

Also, I tried it out for 2021 and turbotax came back with something like"you won't be able to Efile"

Please clarify.

I did not "acquire" I purchased.  I did not use, sell or exchange.

Please clarify! 

[JohnB5677]

The exact wording on 1040 is "At any time during 2021 did you receive, sell, exchange or otherwise dispose of any financial interest in any virtual currency?

The IRS instructions read

"A transaction involving virtual currency does not include the holding of virtual currency in a wallet or account, or the transfer of virtual currency from one wallet or account you own or control to another that you own or control. If your only transactions involving virtual currency during 2021 were purchases of virtual currency for real currency, including the use of real currency electronic platforms such as PayPal and Venmo, you are not required to check the “Yes” box next to the virtual currency question."

Page 17 of      IRS Form 1040 Instructions

[jhirschi]

Thank you! I've been looking 30 minutes for how to change that.

[Nan2C]

thanks John B!  YES! pays to know where to look on IRS.gov website.

EXCELLENT

[bobby_joe23]

hello-

I made the mistake of answering no to this but do indeed have crypto transactions.  I do not see anywhere to change my answer from no to yes for the year 2022 and the online version.  Is this still possible?

Even when i go to enter my crypto transactions it doesn't ask me to update the answer or update it to "yes" for me after i enter them in.  

[Nan2C]

I have the desktop (download) version.  I wanted to try clicking yes to see what would happen.  Got a message saying I couldn't Efile.  For me it didn't matter... I didn't buy BTC until Jan 2022. I was doing some ahead of time research out of curiosity. 

 Somehow I was able to delete and go back to my previous page (I think it was by looking at the tax forms themselves vs "Easy")  I changed the Yes/No election on the form itself.

I don't think that will help you, however, with the online version. I am not familiar with it, but if there is a way you can view the forms online that might help you.

[GeorgeM777]

@bobby_joe23  Yes, you can change your answer to the question regarding virtual currencies.  Given that you are using TurboTax online, when you open your account, use the search function (look for the magnifying glass in upper right corner of your page) and enter the term "cryptocurrency"  (you don't need to use the quotes).  Click enter and you should see a jump-to link that will take you back to the page where you can modify you answer.

Assuming you have already filed your return, you will need to wait until you receive notice from the IRS that your return has been accepted.  When you are so notified that your return has been accepted, you can then go back into your account, and begin the process to amend your return.   After signing back into your account, the lower right part of your page will be where you will see the option to amend your return.  Click in the field where you are given the option to amend, and respond to the questions accordingly.  

[bobby_joe23]

appreciate the quick response but this just took me into the "Your Investment Sales Summary" where i have entered my crypto transactions.  even if i just continue out of here it never does ask me the question again so i can correct it.  

**update** i checked the actual 1040 form and it is now showing "yes" to the question.  I'm not sure if this happened earlier or i just needed to log out and back in but turbo tax has finally updated the actual form to yes, but it never did ask me that question again. maybe by inputting the crypto transactions forces it to go to yes?

thanks all!

[DawnC]

Yes, when you put in your crypto transactions in the Investment income section, it will change a NO answer to YES.   But if you want to get back to the question in the interview, you would go to the Personal Income section (in desktop) or Wages and Income (in Online) and scroll all the way to the bottom of the income type list.    You will either click on Wrap up Income (Online version) or Done with Personal Income (desktop).    This action generates the income finalizing questions, including questions regarding natural disasters, foreign assets, and the virtual currency question.     @bobby_joe23

[finallyfenix]

@DawnC I tried to give you a thumbs up but it would not accept.  I don't understand why the thumbs up did not work but thank you for your correct answer which worked for me on my CD Desktop Premier Windows 10 version.

[finallyfenix]

@DawnC, can you let me know why on the Premier Desktop Windows 10, the task bar (File, Edit, View, Tools, Online, Help) does not work if you have under 100 stock transactions.  I have one tax return and it has stock transactions and I am doing another tax return with no stock transactions and all is fine.  That seems to be the only difference between the two.  I have contacted TT support about 7 times and I cannot get an answer.  They have had me uninstall and reinstall over 10 times now with no changes.  I don't know how to get to someone who understands this problem.

[SonjaS1]

This was confusing and I also ran into the issue where I selected Yes because I bought crypto but didn't sell any, the question asks do you "receive" so that's very unclear. I guess I need to amend mine now? Maybe you can add a tip when people fill that out to prevent this issue from repeatedly occuring.

[JohnB5677]

You do not have to amend your tax return solely because of the Cryptocurrency question.  In the worse case, the IRS would send you a letter and ask "DID YOU REALLY HAVE TAXABLE CRYPTOCURRENCY TRANSACTIONS?", and you can say no.

The question comes directly from the IRS.  Purchasing cryptocurrency is not a taxable event. but people do receive cryptocurrency from airdrops, staking, and as payment for services or products.  These are taxable events, and that is why the question is worded that way.

[maggie74]

Does this answer still apply in 2021? TT says acquired, sold, exchanged, or disposed of...