AICPA Proposes IRS FAQs Pertaining to 2022 Form 1040 Digital Asset Question
Washington, D.C. (February 28, 2023) – The American Institute of CPAs (AICPA) submitted a letter to the Department of the Treasury and the Internal Revenue Service (IRS) proposing Frequently Asked Questions (FAQs) and suggested answers to assist taxpayers in responding to the new digital asset question on the 2022 Form 1040 and instructions and for the 2023 Form 1040 instructions to be modified. The proposed FAQs will allow taxpayers and practitioners to properly comply with the question and overall reporting requirements for digital assets.
The AICPA provided a list of 12 questions with suggested answers and, for several of these suggested FAQs, provided rationale or a further explanation or observations about the answer, but do not intend that would be part of the posted FAQ.
Among the questions and suggested answers the AICPA believes should be addressed by the FAQs are the following:
What is a digital representation of value?
What are the “characteristics of a digital asset” as that term is used in the 2022 Form 1040 instructions?
Does the Form 1040 digital asset question only pertain to the taxpayers signing the Form 1040 or also to any dependents claimed on the return?
Are digital assets as defined at Code section 6045(g) considered “property” for tax purposes as described in Notice 2014-21 for virtual currency?
“We encourage the IRS to update Notice 2014-21 to clarify how the questions and answers in the notice apply more broadly to digital assets as defined at section 6045(g), rather than have the Q&As only apply to virtual currency unless the Q&A only pertains to virtual currency and not to other types of digital assets,” the AICPA states in the letter.
About the American Institute of CPAs
The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 421,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. AICPA sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives continuing education to advance the vitality, relevance and quality of the profession.
BACKGROUND & RESOURCES:
AICPA webpage on virtual currency and digital assets tax guidance and resources
On December 16, 2022, the AICPA submitted a letter to Treasury and the IRS requesting modification of the 2022 Form 1040 instructions to provide greater certainty to taxpayers and their preparers in complying with the question and overall reporting requirements for digital assets.
On October 28, 2022, the AICPA submitted comments to Treasury and the IRS on reporting virtual currency transactions under IRC section 6045, section 6050I and the Form 8300 and instructions.
On August 29, 2022, the AICPA submitted a letter to the IRS commenting on the virtual currency question on the Form 1040 and instructions and requesting clarification.
The AICPA submitted several letters to the IRS requesting virtual currency guidance on Notice 2014-21. These letters we submitted:
Contact: Veronica L. Vera