Draft Form 1040 Schedule 1 Update and Virtual Currency Reporting
The IRS has issued the second early release draft of the 2019 Form 1040, Schedule 1, Additional Income and Adjustments to Income, which includes the following checkbox question: "At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?"
Taxpayers must check the appropriate box to answer this virtual currency question if they file Schedule 1 to report income or adjustments to income that can’t be entered directly on Form 1040. However, taxpayers do not need to file Schedule 1 if their answer to this question is "No" and they do not have to file Schedule 1 for any other purpose. The draft Schedule 1 is available here.
The IRS issued Rev. Rul. 2019-24, I.R.B. 2019-44, and frequently asked questions (Frequently Asked Questions on Virtual Currency Transactions), earlier this week. They provide guidance on virtual currency as part of a wider effort to assist taxpayers and to enforce the tax laws in this rapidly changing area.
This early release of Schedule 1 is intended to give tax software partners the required information to make system updates before the final form is released later this year. Moreover, the related draft Form 1040 instructions, also now available on IRS.gov, include information to help taxpayers determine how to answer this new question. Finally, comments on Schedule 1 will be accepted at WI.1040.Comments@IRS.gov for a 30-day comment period beginning on October 11, 2019. Although the IRS cannot respond to each comment individually, it has assured taxpayers that all feedback will be considered.