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.

If you have not exchanged any bitcoin and are still holding the coin then you may answer No. 

As soon as you convert it back to USD (or any other currency for that matter), even if you do not purchase anything, there is a reportable transaction.

After answering YES that I made crypto currency transactions in 2020 I figured that I had no tax consequences to report.   TurboTax is not allowing me to retrace my steps to answer this question "NO".  

I'm 90% complete.  Do I have to delete my entire work effort and start my 2020 taxes all over to change that answer? 

To change your answer in TurboTax Did you made crypto currency transactions in 2020?

1. Go to the Wages&Income menu page and select  I'll Choose what I will work on.  The full menu will be displayed.  If you're using TT Desktop, it's on the Personal Taxes page.
2. A the bottom of the menu, choose Done with income.  Continue for another page or two and you will be able to change your answer.
3. If you've already made the Virtual Currency entries, remove them first. You can test it without removing them, but it may be necessary to do so.

@R1952

Thank you Renee.  It worked just like you said. 

Apparently (FY) once this virtual currency question is answered, its locked and the screen is no longer available until closing/reopening the TurboTax desktop program.  

One follow-up question...

Since TurboTax asks the yes/no question, does filing with TurboTax submit a yes/no response to the IRS?

Thx, R1952

Yes.  Filing in any way requires the answer to this question.  The is a question on the Form 1040 right after your name and address box at the top.

At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? Yes/No

• See the image below.

Thank you very much Dianne.  Three decades of doing my taxes with TurboTax weaned me from stepping through the actual IRS tax forms. 

So now that I know to respond YES for "acquiring" virtual currency (even if not a taxable event), I need to find and review whatever the location for virtual currency transaction inputs in case this establishes the basis of my purchases.  The TT Forum has a lot of discussion about importing CSV files, but I did not find any TurboTax program reference to importing or manually entering such transactions.   Help???  Thx!

Yes, the IRS form 1040 added that question this year. If you don't want to import, another option, type in 4 lines manually. Each line is the total for that type of transaction. The IRS has the same brokerage statement and totals. 

Enter the totals for each:

• short term covered
• short term non-covered
• long term covered
• long term non-covered

I am in a similar situation. The IRS has provided additional commentary this year that even those who just purchase crypto must answer "YES" to the crypto question regardless if there is a taxable event associated with their crypto activity in 2020 (such as a sale). This is precisely my circumstance as I bought crypto in 2020 and did not sell or use any of it. The problem I am having is that TurboTax only asks "Did you sell or trade cryptocurrency in 2020?" and if I answer "Yes" then Turbotax leads me down the trail of entering Purchases and Sales (I have no sales). Simply asked, how do I answer 'Yes" to the crypto question on the first page of the return and ignore all the rest of the crypto questions in TurboTax since I had no taxable events?

You must answer Yes when asked if you received, sold, or exchanged. You did receive. You did not sell, ignore all the rest.

@MaxTax00

Going to update this thread for others:

https://www.irs.gov/individuals/international-taxpayers/freque[product key removed]ions-on-virtual-currency-transactions

Per IRS guidance, look at question 5:

Great. Thank You. It seemed odd that they said received instead of purchased in the question. I am glad they clarified that those who just purchased but did not sell can answer "No."

IRS site says NO. That is if you purchased with actual money and did not trade it since.

Thank you for explaining how to get back to the crypto question. But when I hit "yes" I bought or sold crypto, it just goes to the end and says "here's a picture of your 2020 income" without a place to enter the crypto that I bought and sold. Odd. I finished income and it never asked for details for crypto. Any ideas? Thanks.

this how to report the sale or trade of cryptocurrency.  

Capital gains, losses, and 1099-B forms are all entered in the same place:

1. Open or continue your return in TurboTax if it isn't already open.
2. Search for investment sales and then select the Jump to link in the search results.
3. Answer Yes to the question Did you sell stocks, mutual funds, bonds or other investments?
   • If you land on the Here's the investment sales we have so far screen, select Add More Sales.
4. Following the instructions and we'll calculate the gain or loss from the sale.

Your total capital gains for the year minus your total capital losses result in a net gain or a net loss.

You can deduct a net loss of up to $3,000 ($1,500 if married filing separately). Any capital loss you couldn't deduct this year can be carried forward and deducted on future tax returns as a capital loss carryover.

Gain and loss on cryptocurrency transactions

both of the links above bring a 404 error.

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! 

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

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

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

EXCELLENT

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.  

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.

@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.  

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!

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