Virtual currency question

[Greta]

Why does the IRS want to know about virtual currency trading? In 2020 had a client who received a Robin Hood Brokerage 1099 that showed his multiple bitcoin trades. But in what way is this different from other stock trades? Now another client bought $5K in bitcoin, but no further transaction. I check the Yes box?

[IRonMaN · Accepted solution]

The IRS wants to know because of the potential for under the table transactions.

[jeffmcpa2010]

Most virtual currency transactions do not go through brokerage accounts. 

Because of that the assumption is that the IRS wants the information so they can begin tracking those who have invested in virtual currency to be sure that they report any gains.

Suspicious minds might believe the IRS might create a list of taxpayers, whom the IRS should be watching more closely in the future. (That suspicion gives me just one more reason to stay away from virtual currencies.)

[BobKamman]

If your only transactions involving virtual currency during 2021 were purchases of virtual currency for real currency, you are not required to check the “Yes” box. But you must not leave the field blank even if you are not required to answer “Yes.”

It’s simply the IRS way of letting you know that they have no idea what you are doing with your money, unless you self-report.