Cryptocurrency, stablecoins, and nonfungible tokens are just among the many other forms of digital assets, which IRS warned should be included when it comes to reporting income.

The Internal Revenue Service reminded taxpayers to report all digital asset-related income and answer a new digital asset question on their 2022 federal income tax return or face consequences, such as delayed funds or even penalties, as reported by The Epoch Times.

IRS form 1040 this year replaced the term "virtual currency" with "digital assets."

There is also a question that appears at the top of tax forms 1040, Individual Income Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Income Tax Return.

The new changes were made after the agency released a memo on January 24 regarding the replacement of terms.

IRS noted that accurately reporting all income is a legal requirement. It also includes reporting income from digital assets.

READ NEXT: Disaster SNAP Benefits: Who Is Eligible to Get Extra Payments, Hurricane Ian Aid in Florida?  

IRS Form 1040

The question asks whether the filing taxpayer has received or sold a digital asset. The IRS noted that all taxpayers should answer questions about whether they engaged in any transactions involving digital assets.

Taxpayers should check yes if they received any form of digital assets as payment or reward, mining, and a hard fork, according to the IRS website.

Disposing of digital assets in exchange for property services and trading for another digital asset would also deem a "yes" answer on the form.

Selling a digital asset would also need a "yes" answer on the forms.

Meanwhile, taxpayers can check the "no" answer, if they have been holding digital assets in a wallet or account; or transferring digital assets from one wallet account they own or control to another wallet or account they also own or control.

Taxpayers can also answer "no" on the forms if they purchased digital assets using U.S. or other real currency through the use of PayPal or Venmo.

IRS Taxing Digital Assets

The IRS is working on enforcing cryptocurrency tax compliance as the agency determines cryptocurrency as property, which would mean that cryptocurrency transactions are taxable by law just like any transactions related to any other property.

Cryptocurrency tax rates depend on the filers' income, tax filing status, and the length of time you owned your crypto before selling it.

If you spend your crypto and have increased its value from when you bought it, you owe crypto taxes.

Taxable activities for cryptocurrency transactions include selling cryptocurrency for a fiat currency; using cryptocurrency to purchase goods or services; and trading different types of cryptocurrency.

Nonfungible tokens also work the same way as crypto taxes.

You can report crypto gains and losses on Form 8949, which would ask for the following information on crypto trades, such as name of the cryptocurrency, date acquired, date of crypto transactions, proceeds or sales price, cost basis, and total gain or loss.

READ MORE: SNAP Benefits 2022 Update: $301.8 Million Texas Payments Confirmed for July 2022

This article is owned by Latin Post.

Written by: Mary Webber

WATCH: Crypto taxes 2022: What to know about reporting digital assets, NFTs to the IRS - from Yahoo Finance