You must answer the virtual currency tax question, locate at the top of Form 1040 and Form 1040-SR. You must check the box indicating either “yes” or “no” about your having transaction involving virtual currency. Virtual currency transactions include:
- The receipt of virtual currency as payment for goods or services provided;
- The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift;
- The receipt of new virtual currency as a result of mining and staking activities;
- The receipt of virtual currency as a result of a hard fork;
- An exchange of virtual currency for property, goods or services;
- An exchange/trade of virtual currency for another virtual currency;
- A sale of virtual currency; and
- Any other disposition of a financial interest in virtual currency.
If you disposed of any virtual currency that was held as a capital asset through a sale, exchange or transfer, you should check “Yes” and use Form 8949 to figure your capital gain or loss and report it on Schedule D (Form 1040).
If you received any virtual currency as compensation for services or disposed of any virtual currency you held for sale to customers in a trade or business, you must report the income as you would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1, or inventory or services from Schedule C on Schedule 1).