Since 2020, the IRS has required taxpayers to answer a question about their involvement with virtual currencies on their tax returns. For tax year 2022, the IRS has replaced the term “virtual currencies” with “digital assets,” a category that includes not only cryptocurrencies and stablecoins, but also non-fungible tokens (NFTs).
Generally, you must answer “Yes” to the digital asset question if any of the following occurred in 2022:
– You received digital assets as payment for labor, goods or services.
– You traded digital assets or gave them away as gifts.
– You received digital assets as an award or reward, as a result of a hard fork, or due to mining, staking or similar activities.
– You sold a digital asset for cash, exchanged it for other (non-digital) property, or otherwise disposed of your financial interest in it.
You may generally answer “No” to the question if you simply held digital assets throughout 2022, moved digital assets between your digital wallets, or purchased digital assets for cash.
Generally, if you receive digital assets as payment for labor or services, you must report the value of the assets as employee income or, if you are self-employed, as business income. Many other transactions could result in a taxable capital gain. Our tax professionals at RTW Xxact Enterprises can help you properly report your digital asset transactions, and figure and pay any tax due on them.