Taxpayers can now upload more documents to IRS; new online option for 9 notices can help resolve issues faster

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WASHINGTON — The Internal Revenue Service announced today that taxpayers who receive certain notices requiring them to send information to the IRS now have the option of submitting their documentation online through IRS.gov.

This new secure step will allow taxpayers or their tax professional to electronically upload documents rather than mailing them in, helping reduce time and effort resolving tax issues.

In this stage of the ongoing effort, nine notices will be available for this feature. This potentially can help more than 500,000 taxpayers each year who receive these notices, which include military personnel serving in combat zone areas and recipients of important credits like the Earned Income Tax Credit and Child Tax Credit.

“This capability is another step forward by the IRS to help taxpayers and improve service,” said IRS Acting Commissioner Doug O’Donnell. “This provides immediate benefits to taxpayers, who have nearly instant confirmation that documents were received by the IRS. In turn, this will dramatically speed up the resolution of issues by removing a time-consuming step in the process. This means people can have their issues resolved much faster, including getting refunds to affected taxpayers faster. We will continue to look at improvements like this as we work to transform the IRS following passage of the Inflation Reduction Act last year.”

Initially, the online correspondence feature will be available to taxpayers who receive one of nine IRS notices. For the most part, the IRS sends these notices to individual tax filers claiming various tax benefits, such as the Earned Income Tax Credit for low- and moderate-income workers, the Child Tax Credit for families with dependents, the Premium Tax Credit for those who obtain health coverage through the Health Insurance Marketplace and members of the military claiming combat zone tax benefits.

Taxpayers receiving these notices can respond securely to IRS online, regardless of whether they have an IRS Online Account.

IRS created the Document Upload Tool

IRS information technology specialists developed a prototype for the Document Upload Tool in 2021. Since then, the IRS has been testing this feature on a limited number of exam-related notices, and 38% of the responses to these notices have used the agency’s secure electronic communications rather than traditional mail.

How it works

Language on the notice informs the taxpayer to, “Send us your documents using the Documentation Upload Tool within 30 days from the date of this notice.” It includes the link and a unique access code.

  • The taxpayer can open the link in any browser and then input their unique code, their first and last name and their Social Security, Individual Taxpayer Identification or Employee Identification number.
  • The taxpayer can then securely upload scans, photos or digital copies of documents (maximum of 15MB per file, up to 40 files).
  • The taxpayer receives a confirmation that the IRS received their documents, and the IRS employee assigned the case can manage the transmitted documents.

What notices qualify?

Taxpayers who receive one of the following notices with the link and access code can choose to upload their documents:

  • CP04, relating to combat zone status.
  • CP05A, information request related to a refund.
  • CP06 and CP06A, relating to the Premium Tax Credit.
  • CP08, relating to the Child Tax Credit.
  • CP09, relating to claiming the Earned Income Tax Credit.
  • CP75, relating to the EITC.
  • CP75a, relating to the EITC.
  • CP75d, relating to the EITC and other credits.

Future expansion planned

In the coming months and years, the IRS plans to expand this capability to dozens of other notices. In addition, the IRS will offer digital correspondence on a variety of other taxpayer interactions. During live interactions such as phone calls with taxpayers, IRS employees will be able to grant upload access by providing the link and unique access code.

With secure digital correspondence, everybody wins

For taxpayers and tax professionals working with the IRS, this new capability reduces the correspondence burden, ensures tax compliance and improves the customer experience. For IRS employees, this reduces paper correspondence, decreases processing time and speeds case resolution.

For more information, see the Fact Sheet 2023-05, IRS expands secure digital correspondence for taxpayers.

Make your Ohio income tax payments electronically!

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The Department has an easy, secure, and free option for you to make payments using the “Guest Payment” feature on our website.

If you are:

  • An individual who pays their Ohio income tax payments by paper check, OR
  • A tax preparer who generates payment vouchers/coupons for your clients to attach to their paper check to pay their IT 1040 or SD 100 return payments, or their Ohio income or school district income tax estimated payments

Then make your SECURED payment using our EASY and FREE service by:

  • Visiting the Department’s “Guest Payment” feature on our website at: tax.ohio.gov/pay
  • Following the prompts to enter your specific information (name, SSN, bank routing and account number, payment type, etc.)

Benefits of the “Guest Payment” feature:

  • Safely, and securely pay your Ohio tax
  • Instant confirmation your payment has been received by the Department
  • Never miss an estimated payment with prescheduled payments
  • Eliminate the need to search for the correct payment voucher/coupon
  • Save money on postage required to mail a paper check
  • It’s as easy as 1, 2, free!

Notice 2023-23: Financial institution reporting for 2023 RMDs

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Executive summary: Notice 2023-23

Notice 2023-23 provides guidance to financial institutions on reporting required minimum distributions (RMDs) for 2023 based on SECURE 2.0 changes.

Notice 2023-23: Financial institution reporting for 2023 RMDs

Notice 2023-23

On March 7, 2023, the IRS released notice 2023-23 providing guidance to financial institutions on reporting RMDs for 2023.

SECURE 2.0 amended section 401(a)(9)(C) to delay the required beginning date applicable to section 401(a) plans and other eligible retirement plans under section 402(c)(8), including individual retirement accounts and annuities (IRAs).

The required beginning date (date by which RMDs must begin) for an IRA owner who turns age 72 after Dec. 31, 2022and age 73 before Jan. 1, 2033 is April 1 of the calendar year following the year in which the individual turns 73. Prior to SECURE 2.0 an IRA owner would need to begin RMDs by April 1 of the calendar year following the year in which they turn 72.

The amendment under SECURE 2.0 is effective for distributions required to be made after Dec. 31, 2022 for individuals who will turn 72 after that date. Individuals who turn 72 in 2023 (anyone born in 1951) will have a required beginning date of April 1, 2025 rather than April 1, 2024. Therefore, these individuals will have no RMD due for the 2023 tax year.

IRA Reporting

For IRA owners who have a RMD due in 2023 the financial institution acting as the trustee, custodian or issuer must file a 2022 Form 5498 by May 31, 2023 and check Box 11 that a RMD is required for 2023. The financial institution may also provide further information in Box 12a (RMD date) and Box 12b (RMD amount). Under notice 2002-27, 2002-1 CB 814, the financial institution must furnish a statement to the IRA owner by Jan. 31, 2023 that informs the IRA owner of the date by which the RMD must be distributed and either provides the amount of the RMD or offers to calculate that amount on request (RMD statement).

For IRA owner who will turn 72 in 2023 the financial institution should not send the RMD statement required under Notice 2002-27 and the 2022 Form 5498 should not have Box 11 checked or any entries in Box 12a or 12b. This notice does provide relief for financial institutions who may have already sent out RMD statements to those individuals who will turn 72 in 2023. As long as the financial institution notifies the IRA owner that no RMD is actually required for 2023 by April 28, 2023, the IRS will not consider the RMD statement to have been provided incorrectly to the IRA owner.

SECURE 2.0 did not change the required beginning date for IRA owners who turned 72 in 2022. The IRS encourages all financial institutions to remind IRA owners who turned 72 in 2022 that they are still required to take their RMDs by April 1, 2023.

 

Tax Time Guide: IRS reminder to report all income; gig economy and service industry, digital or foreign assets and sources

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WASHINGTON — The Internal Revenue Service reminds taxpayers of their reporting and potential tax obligations on income from the gig economy and service industry, transactions from digital assets, and foreign sources or holding certain foreign assets.

Information available on IRS.gov and Instructions for Form 1040 and Form 1040-SR can help taxpayers understand and meet these reporting and tax requirements.

Gig economy earnings are taxable

Generally, income earned from the gig economy is taxable and must be reported to the IRS on tax returns.

The gig economy is activity where people earn income providing on-demand work, services or goods, such as selling goods online, driving a car for deliveries or renting out property. Often, it’s through a digital platform like an app or website.

Taxpayers must report income earned from the gig economy on a tax return, even if the income is:

  • From part-time, temporary or side work.
  • Paid in any form, including cash, property, goods or digital assets
  • Not reported on an information return form like a Form 1099-K, 1099-MISC, W-2 or other income statement.

For more information on the gig economy, visit the gig economy tax center.

Service industry tips are also taxable

People who work in restaurants, salons, hotels and similar service industries often receive tips for the customer service they provide. Tips are usually taxable income, and it’s important for people working in these areas to understand details on how to report tips.

Tips are optional cash or noncash payments customers make to employees.

  • Cash tips include those received directly from customers, electronically paid tips distributed to the employee by their employer and tips received from other employees under any tip-sharing arrangement. All cash tips must be reported to the employer, who must include them on the employee’s Form W-2, Wage and Tax Statement.
  • Noncash tips are those of value received in any other medium than cash, such as: tickets, passes or other goods or commodities a customer gives the employee. Noncash tips aren’t reported to the employer but must be reported on a tax return.

Employees don’t have to report tip amounts of less than $20 per month per employer. For larger amounts, employees must report tips to the employer by the 10th of the month following the month the tips were received.

The employee can use Form 4070, Employee’s Report of Tips to Employer, available in Publication 1244, Employee’s Daily Record of Tips and Report to Employer, an employer-provided form or other electronic system used by their employer.

For more information on how to report tips see Tip Recordkeeping and Reporting.

Understand digital asset reporting and tax requirements

The IRS reminds taxpayers that there’s a question at the top of Forms 1040 and 1040-SR that asks about digital asset transactions. All taxpayers filing these forms must check the box indicating either “yes” or “no.”

If an individual disposed of any digital asset that was held as a capital asset through a sale, exchange or transfer, they should check “Yes” and use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss and report it on Schedule D (Form 1040), Capital Gains and Losses, or Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, in the case of a gift.

Examples of transactions involving digital assets include:

  • A sale of digital assets.
  • The receipt of digital assets as payment for goods or services provided.
  • The receipt or transfer of digital assets for free (without providing any consideration) that does not qualify as a bona fide gift.
  • The receipt of new digital assets as a result of mining and staking activities.
  • The receipt of new digital assets as a result of a hard fork.
  • An exchange of digital assets for property, goods or services.
  • An exchange/trade of digital assets for another digital asset(s).
  • Any other disposition of a financial interest in digital assets.

If individuals received any digital assets as compensation for services or disposed of any digital assets they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1a, or inventory or services on Schedule C).

More information on digital assets can be found in the Instructions for Form 1040 and 1040-SR and on the IRS’ Digital Assets page.

Report foreign source income

A U.S. citizen or resident alien’s worldwide income is generally subject to U.S. income tax, regardless of where they live. They’re also subject to the same income tax filing requirements that apply to U.S. citizens or resident aliens living in the United States.

U.S. citizens and resident aliens must report unearned income, such as interest, dividends and pensions from sources outside the United States unless exempt by law or a tax treaty. They must also report earned income, such as wages and tips, from sources outside the United States.

An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are available only if an eligible taxpayer files a U.S. income tax return.

A taxpayer is allowed an automatic two-month extension to June 15 if both their tax home and abode are outside the United States and Puerto Rico. Even if allowed an extension, a taxpayer will have to pay interest on any tax not paid by the regular due date of April 18, 2023.

Those serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return also qualify for the extension to June 15. IRS recommends attaching a statement if one of these two situations applies. More information can be found in the Instructions for Form 1040 and Form 1040-SR, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad and Publication 519, U.S. Tax Guide for Aliens.

Reporting required for foreign accounts and assets

Federal law requires U.S. citizens and resident aliens to report their worldwide income, including income from foreign trusts and foreign bank and other financial accounts. In most cases, affected taxpayers need to complete and attach Schedule B (Form 1040), Interest and Ordinary Dividends, to their tax return. Part III of Schedule B asks about the existence of foreign accounts such as bank and securities accounts and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

Further, separate from reporting specified foreign financial assets on their tax return, U.S. persons with an interest in or signature or other authority over foreign financial accounts where the aggregate value exceeded $10,000 at any time during 2022 must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Because of this threshold, the IRS encourages U.S. persons with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is available only through the BSA E-filing System website.

The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is April 15, 2023. FinCEN grants U.S. persons who miss the original deadline an automatic extension until Oct. 15, 2023, to file the FBAR. There is no need to request this extension. See FinCEN’sPDF website for further information.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional guidance is available in Publication 17, Your Federal Income Tax (For Individuals).

Ohio Supreme Court to hear oral arguments for 2020 municipal income tax refunds

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The Ohio Supreme Court is set to hear oral arguments on Wednesday, March 1 in taxpayers’ case to obtain 2020 municipal income tax refunds. The arguments will be broadcast live beginning at 9:00am on the Ohio Channel, where they are also archived. Court News Ohio on Feb. 22 wrote a preview of the case, and the Court’s Office of Public Information also released a detailed article.

OSCPA filed an amicus brief on Aug. 10, 2022, to support those taxpayers based on the Society’s position that taxing persons who neither work nor live in a jurisdiction is unconstitutional.

In the amicus brief, OSCPA argues that the cities are “effectively interpreting R.C. 718.011 and Section 29 as a taxing provision, or in the alternative, as a situs of where income was earned provision, but that is not what R.C. 718.011 or Section 29 says or means. R.C. 718.011 is not a taxing provision, nor does R.C. 718.011 situs where income is earned for purposes of imposing tax. It is a safe harbor to simplify employer withholding. It clearly states that the deemed location is “for purposes of division (B)(1)” – (where the 20-Day Withholding Exception is codified) and does not determine the ultimate taxability of the wages in the hands of the employee.”

Section 29 and R.C. 718.011 of House Bill 197, a 2020 law change early in the pandemic, was intended to address the significant withholding challenges faced by employers of workers who suddenly were working remotely – often outside the city where the business itself was located.  However, many cities where the money was withheld refused to grant refunds to remote taxpayers.

OSCPA worked in 2021 to secure a law change in House Bill 110 ensuring qualified remote workers would be able to receive municipal tax refunds for Tax Year 2021. In that same bill, the Legislature left it up to the Ohio Supreme Court to address refunds for 2020. The goal is that the Ohio Supreme Court will clearly recognize the distinction between employers’ withholding and employees’ tax liability.

Several cases were filed in Ohio questioning the constitutionality of requiring individual taxpayers to pay income tax to municipalities where they neither lived nor physically performed services.  Two of those cases have reached the Ohio Supreme Court. Both were decided against the taxpayers at the appellate level, and the Ohio Supreme Court declined to hear the first appeal (Columbus) in March 2022.

However, the Ohio Supreme Court voted 4-3 on June 7, 2022 to take up the second case (Cincinnati), Schaad v. Alder. Justices Kennedy, DeWine, Fischer, and Donnelly voted to take up the case.  Justices O’Connor, Stewart, and Brunner dissented.  O’Connor has since been replaced on the Court by Justice Joseph Deters.

A final decision is not expected until several months after the March 1 oral arguments.

SALT Tax Reform

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A bipartisan coalition in the House of Representatives has renewed its push to lift the $10,000 cap on deducting state and local taxes (SALT) from federal tax returns.

The so-called cap was enacted in 2017 as part of then-President Donald Trump’s federal tax cuts, the Tax Cut and Jobs Act (TCJA). It’s mostly impacted higher-income property owners in states such as California, New Jersey, and New York.

The SALT Caucus was established to advocate for a repeal of the cap. Originally formed in 2021, the group of nearly three dozen U.S. Representatives has added new names from both sides of the aisle in its efforts to lift the cap. They include Democrat of New York Pat Ryan and New York Republicans Mike Lawler, Marc Molinaro, Anthony D’Esposito, and Nick LaLota.

“This policy violates 150 years of precedent in federal tax law, disproportionately harms New York, and unfairly imposes a marriage penalty on couples filing jointly by having them face the same $10,000 cap as individuals,” said Ryan in a statement. “According to research by the National Association of Realtors, in New York, 35% of taxpayers claimed the SALT deduction in 2016 before it was capped. Raising the SALT cap would therefore lower taxes for tens of thousands of New Yorkers.”

The group is led by New York Republican Andrew Garbarino along with fellow Republican Young Kim of California and Democrats Josh Gottheimer of New Jersey and Anna G. Eshoo of California. “The cap on the SALT deduction is an attack on the middle class, raising taxes on 200,000 families in my Congressional District,” said Eshoo, SALT Caucus Co-Chair. “Prior to the 2017 tax law, my constituents claimed an average deduction of $63,083, and as a co-chair of the bipartisan SALT Caucus, I’m firmly committed to restoring this vital deduction for Californians.”

Gottheimer said the caucus would consider two outcomes: letting the cap expire or negotiating from a position of power. “We’re not going to be a cheap date to our negotiators, so we’re not going to settle for a low-bid offer,” he said. “So, if you want to talk, this is the caucus to talk to get this done, to restore SALT and make life more affordable.”

Whether the group can come together on a specific measure remains to be seen as several members have already come out with different proposals to address the cap.

Rep. Katie Porter, Democrat of California trumpeted her efforts in the last Congress on a “sensible limit” that would increase federal revenue over the long term. Porter co-sponsored legislation that would eliminate the cap for households making up to $400,000, then reinstate the limit on a sliding scale beginning at $60,000 and ultimately phasing out completely for households earning at least $1 million.

California Republican Mike Garcia is promoting a measure that would eliminate the SALT cap entirely. “I think we need to hold this ground very firm, not give into negotiations unless it’s a straight-stock removal of this SALT cap,” he said.

Representatives Mikie Sherrill, Democrat of New Jersey, and New York Republican Mike Lawler have a bill to lift the SALT cap to $100,000 for individuals and $200,000 for married couples filing taxes jointly through 2025, before it expires.

IRS delays Form 1099-K $600 reporting threshold

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The IRS announced that calendar year 2022 will be treated as a transition year for the reduced reporting threshold of more than $600 that was to go into effect for information returns due in 2023. See Notice 2023-10PDF. Pursuant to Notice 2023-10, for calendar year 2022, third party settlement organizations who issue Forms 1099-K, Payment Card and Third Party Network Transactions, are only required to report transactions where gross payments exceed $20,000 and there are more than 200 transactions.

Ohio Department of Taxation

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The Ohio Department of Taxation on Jan. 20 released a third round of guidance for pass-through entities (PTEs) who “elect” to be subject to a new entity-level tax in response to the federal $10,000 SALT deduction cap limit placed on individuals.

The ODT created the new Form IT 4738 after the enactment of OSCPA-supported Senate Bill 246, also known as Ohio’s version of the SALT cap deduction parity/workaround.  The guidance includes a final version of the new IT 4738 form and instructions, a new payment coupon, and an additional 13 FAQs bringing the total to 33 FAQs.  All of the prior guidance also can be found by clicking here.

S.B. 246 authorizes PTE owners to claim a refundable credit against the owner’s Ohio income tax liability equal to the owner’s proportionate share of the tax paid by the PTE.  IRS Notice 2020-75 permitted states to enact legislation to clarify that taxes paid by a PTE do not count towards an owner’s $10,000 SALT deduction cap limitation for federal income tax purposes.  Twenty-nine states have addressed this issue, and three states have introduced bills. See the map of states with pending or enacted legislation.

Although ODT has been releasing guidance and adding FAQs, S.B. 246 requires ODT to enact rules regarding multi-tiered entities, including partnerships.  Those rules have not been adopted yet.

***(F) The tax commissioner shall adopt rules to administer the tax levied under this section. Such rules shall include a description of how the adjustments to income under divisions (A)(36) and (S)(15) of section 5747.01 of the Revised Code and the credit under section 5747.39 of the Revised Code apply to direct or indirect owners of an electing pass-through entity based on various ownership structures. Any rule adopted under this section is not a regulatory restriction for the purpose of section 121.95 of the Revised Code.****

Finally, OSCPA-supported Senate Bill 18 is now in effect, which lowers Ohio’s withholding rates on nonresident investors in Ohio-operating PTEs. The effective date of the withholding rate change to 3% applies to PTE’s taxable years beginning on or after Jan. 1, 2023. Prior law required these entities to withhold on behalf of nonresident individuals at 5% and other PTEs (nonindividuals) at 8.5%.

Change to Ohio 529 plan tax deduction

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Starting in 2023, Ohio residents who contribute to any 529 plan (not just the Ohio 529 plan) are allowed up to $4,000 per beneficiary per year to be deductible in computing Ohio taxable income. This change now allows  Ohio based taxpayers to receive a tax deduction for contributions made to a 529 provider in ANY state in the US.  The objective of this act is to provide the same tax benefit to all families saving for college in Ohio. Currently, only families investing in Ohio’s 529 college savings plan receive the $4,000 deduction against their taxable income. The underlying goal is to encourage all Ohio taxpayers to invest in a 529 college savings account to plan for the cost of going to college. This act extends the same tax benefit to all Ohio families paying state income taxes regardless of whether they invest in Ohio’s plan or another state’s plan that may be a better option for their family needs. This act also provides competition for Ohio’s college savings plan to ensure families investing in Ohio’s plan obtain the highest possible return on their investment at the lowest possible cost associated with the plan.

https://governor.ohio.gov/media/news-and-media/governor-dewine-signs-bills-into-law-01032023

 

New Digital Assets Question on 2022 Form 1040

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The IRS has updated the question about digital assets on the 2022 Forms 1040, 1040-SR and 1040-NR. Instead of asking about “virtual currency,” for 2022 the question asks: “At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”

Digital assets question. The digital assets question appears at the top of Forms 1040, Individual Income Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Income Tax Return. All taxpayers must answer the question regardless of whether they engaged in any transactions involving digital assets. In addition, the IRS has updated and clarified the instructions for answering the digital assets question to help taxpayers answer it correctly.

What is a digital asset? According to the IRS, a digital asset is a digital representation of value which is recorded on a cryptographically secured distributed ledger. Common digital assets include:

  • Convertible virtual currency and cryptocurrency
  • Stablecoins
  • Non-fungible tokens (NFTs)

Answering the digital assets question. All taxpayers who file a Form 1040, Form 1040-SR or Form 1040-NR must answer the digital assets question by checking either the yes or no box. According to the IRS, a taxpayer must check the “yes” box if they:

  • Received digital assets as payment for property or services provided;
  • Transferred digital assets for free (without receiving any consideration) as a bona fide gift;
  • Received digital assets resulting from a reward or award;
  • Received new digital assets resulting from mining, staking and similar activities;
  • Received digital assets resulting from a hard fork (a branching of a cryptocurrency’s blockchain that splits a single cryptocurrency into two);
  • Disposed of digital assets in exchange for property or services;
  • Disposed of a digital asset in exchange or trade for another digital asset;
  • Disposed of a digital asset in exchange or trade for another digital asset;
  • Sold a digital asset; or otherwise disposed of any other financial interest in a digital asset.

Taxpayers may check the “no” box if their activities were limited to one or more of the following:

  • Holding digital assets in a wallet or account;
  • Transferring digital assets from one wallet or account they own or control to another wallet or account they own or control; or
  • Purchasing digital assets using U.S. or other real currency, including through electronic platforms such as PayPal and Venmo.

Reporting digital asset income. In addition to checking the “yes” box, taxpayers who had digital asset transactions in 2022 must report all income related to those transactions on their 2022 Form 1040. The IRS provided the following examples of reportable digital transactions:

  • A taxpayer who held a digital asset as a capital asset and sold, exchanged or transferred that asset during 2022, must use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss on the transaction and then report it on Schedule D (Form 1040), Capital Gains and Losses, or Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, in the case of gift.
  • A taxpayer who received digital assets in return for providing services as an employee must report the value of assets received as wages. Similarly, a taxpayer worked as an independent contractor and were paid with digital assets, they must report that income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship).