It is tax season and the current Form 1040 asks taxpayers, “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” This is prominently placed on the first page of the tax return, right under the taxpayer’s address and above where dependents get listed. The question itself seems pretty straightforward for most people.

If there is any confusion, it would stem from how broad the term “financial interest” goes. If someone purchased shares of an exchange-traded product or invested in a private fund that owns Bitcoin, did that person acquire a financial interest in virtual currency? Maybe. If someone merely bought Bitcoin, is that an acquisition of a financial interest in virtual currency? One would think that the answer to this question likely is yes.

But the IRS seems to disagree. The IRS added a new “Question and Answer” to their list of FAQs discussing virtual currency transactions. This new Q&A says that if a taxpayer only bought virtual currency in 2020, then they should answer “no” to the question on the 1040.

If you sold, staked, or received crypto as compensation, mined or engaged in any other transactions (other than merely buying crypto with dollars) in 2020, then you should answer yes to the question on the Form 1040. If you only bought crypto for dollars in 2020, then you should talk to your tax return preparer about how to best answer this question.