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IRS updates virtual assets question on tax forms

Tax season is upon us, and the IRS is updating its questions regarding digital assets like cryptocurrency.

In response to the explosion of digital assets in recent years, the 1040 tax form has included a question about virtual currency, which the IRS has treated as property for federal income tax purposes since 2014.

But IRS special agent Brian Watson says the question has evolved.

“This year, the question was updated to, ‘Do you have any digital assets.’ That way, it covers more things,” he said.

Those assets include convertible virtual currency and cryptocurrency, stablecoins — which tie their values to external references like the U.S. dollar, gold commodities or algorithms – and non-fungible tokens, or NFTs.

Watson recommends hiring a tax professional to keep it all straight.

“If you’re not sure whether you have income relating to any of your virtual currencies or digital assets, you need to talk to a professional,” he said. “Because what you don’t want is to happen is, to get an audit letter and to pay the back taxes on that.”

More information is available on  irs.gov.

Nicholas Gerbis was a senior field correspondent for KJZZ from 2016 to 2024.