Taxpayers should continue to report all cryptocurrency, digital asset incomeWASHINGTON — The Internal Revenue Service today reminded taxpayers that they must again answer a digital asset question and report all digital asset related income when they file their 2023 federal income tax return, as they did for their 2022 federal tax returns.

The 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, and was revised this year to update wording. The question was also added to these additional forms: Forms 1041, U.S. Income Tax Return for Estates and Trusts; 1065, U.S. Return of Partnership Income; 1120, U.S. Corporation Income Tax Return; and 1120S, U.S. Income Tax Return for an S Corporation.

Depending on the form, the digital assets question asks this basic question, with appropriate variations tailored for corporate, partnership or estate and trust taxpayers:

“At any time during 2023, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”

What is a digital asset?
A digital asset is a digital representation of value that is recorded on a cryptographically secured, distributed ledger or any similar technology. Common digital assets include:

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

Everyone must answer the question
Everyone who files Forms 1040, 1040-SR, 1040-NR, 1041, 1065, 1120, 1120 and 1120S must check one box answering either “Yes” or “No” to the digital asset question. The question must be answered by all taxpayers, not just by those who engaged in a transaction involving digital assets in 2023.

When to check “Yes”
Normally, a taxpayer must check the “Yes” box if they:

  • Received digital assets as payment for property or services provided;
  • 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;
  • Sold a digital asset; or
  • Otherwise disposed of any other financial interest in a digital asset.

How to report digital asset income
In addition to checking the “Yes” box, taxpayers must report all income related to their digital asset transactions. For example, an investor who held a digital asset as a capital asset and sold, exchanged or transferred it during 2023 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. A taxpayer who disposed of any digital asset by gift may be required to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

If an employee was paid with digital assets, they must report the value of assets received as wages. Similarly, if they 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). Schedule C is also used by anyone who sold, exchanged or transferred digital assets to customers in connection with a trade or business.

When to check “No”
Normally, a taxpayer who merely owned digital assets during 2023 can check the “No” box as long as they did not engage in any transactions involving digital assets during the year. They can also 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.

For a set of frequently asked questions (FAQs) and other details, visit the Digital Assets page on IRS.gov.

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Treasury, IRS issue guidance on the qualified alternative fuel vehicle refueling property credit

WASHINGTON – The Internal Revenue Service and the Department of the Treasury today issued Notice 2024-20 to provide guidance on eligible census tracts for the qualified alternative fuel vehicle refueling property credit and to announce the intent to propose regulations for the credit.

The Inflation Reduction Act amended the credit for qualified alternative fuel vehicle refueling property. The changes apply to qualified alternative fuel vehicle refueling property placed in service after Dec. 31, 2022 and before Jan. 1, 2033.

The credit amount for property not subject to depreciation is 30% of the cost of the qualified property placed in service during the tax year. The credit amount for depreciable property is 6% of the cost of the qualified property placed in service during the tax year but may be increased to 30% of the cost of the qualified property if the prevailing wage and apprenticeship requirements are met. The credit is limited to $100,000 for depreciable property and $1,000 for non-depreciable property.

Property must be placed in service in an eligible census tract to qualify for the credit. An eligible census tract is any population census tract that is a low-income community or any population census tract that is not an urban area. See Appendix A and Appendix B for eligible census tracts.

The primary purpose of the notice is to provide taxpayers with a list of eligible census tracts in advance of the 2023 filing season and to explain how taxpayers can identify the 11-digit census tract identifier for the location where the property is placed in service. The IRS intends to propose regulations including this information in the future, but taxpayers may rely on the notice until proposed regulations are published.

This notice also provides background and definitions, describes relevant census concepts, provides definitions for low-income communities and non-urban census tracts, and explains which delineation of census tract boundaries is applicable for each type of census tract determination. Further, the notice describes how updating of low-income community census tract determinations are considered for credit eligibility.

Finally, the IRS released frequently asked questions related to the alternative fuel vehicle refueling property credit.

More information about the alternative fuel vehicle refueling property credit may be found on the Inflation Reduction Act of 2022 page on IRS.gov.

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IRS NEWS 1/4/2023

Tax credits and deductions change the amount of a person’s tax bill or refund. People should understand which credits and deductions they can claim and the records they need to show their eligibility.

Tax credits
A tax credit reduces the income tax bill dollar-for-dollar that a taxpayer owes based on their tax return.  

Some tax credits, such as the Earned Income Tax Credit, are refundable. If a person’s tax bill is less than the amount of a refundable credit, they can get the difference back in their refund.

To claim a tax credit, people should:

Keep records to show their eligibility for the tax credits they claim.

Check now to see if they qualify to claim any credits next year on their tax return.

Deductions
Deductions can reduce the amount of a taxpayer’s income before they calculate the tax they owe.

Most people take the standard deduction. The standard deduction changes each year for inflation. The amount of the standard deduction depends on a taxpayer’s filing status, age and whether they’re blind and whether the taxpayer is claimed as a dependent by someone else. 

Some people must itemize their deductions, and some people may choose to do so because it reduces their taxable income more than the standard deduction. Generally, if a taxpayer’s itemized deductions are larger than their standard deduction, it makes sense for them to itemize.

Interactive Tax Assistant
Find help with tax questions based on specific circumstances with the Interactive Tax Assistant. It can help a person decide if they’re eligible for many popular tax credits and deductions.

 More information:

Tax credits for individuals: What they mean and how they can help refunds

Deductions for individuals: What they mean and the difference between standard and itemized deductions

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IRS NEWS 1/4/2023

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Required Minimum Distributions

IRS News updated 12/28/2023

Required Minimum Distributions (RMDs) are minimum amounts you must withdraw from your IRA or retirement plan account when you reach age 72. Beginning in 2023, the SECURE 2.0 Act changed the age RMDs must begin to age 73 for taxpayers who are born after 1950.

Roth IRAs are not subject to RMDs until after the death of the original account owner. Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts.   

RMDs from an IRA

You can meet your RMD requirement by withdrawing from one or more of your traditional IRAs, or SEP, SIMPLE, and SARSEP IRAs. It’s not necessary to take a withdrawal from each of your IRAs, but your total withdrawals must be at least equal to the total RMD due from all IRAs. 

Reach age 72 in 2022: The first RMD from your IRAs was due by April 1, 2023, based on the December 31, 2021, account balances. Your second RMD is due by December 31, 2023, based on the December 31, 2022, account balances.

Reach age 72 in 2023:  Your first RMD is for 2024, the year you reach age 73, and is due by April 1, 2025.

Reach age 73 in 2023: You were age 72 in 2022 and your first RMD for 2022 was due by April 1, 2023. Your second RMD is due by December 31, 2023, based on your December 31, 2022, account balances.

RMDs from a retirement plan

To satisfy the RMD requirements in a retirement plan, you must take RMDs separately from each of your retirement plans. If you reached age 72 in 2022, your first RMD for 2022 is due by April 1, 2023, based on your December 31, 2021, account balance. Your 2023 RMD is due by December 31, 2023, based on your December 31, 2022, account balance.

If you’re still employed by the plan sponsor, and not a 5% owner, your plan may allow you to delay taking RMDs from that workplace retirement plan until you retire. IRS rules always require you to take RMDs beginning at age 72 from traditional IRAs, SEP, SIMPLE and SARSEP IRA plans, even if you’re still employed.

For more information, see the recent IRS news release reminding those age 73 and older to make required withdrawals from IRAs and retirement plans by December 31, 2023.   

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