How IRS cares about your tiny crypto gains

I just attended a crypto tax webinar hosted by the IRS. Among many things they covered, I thought the following was one of the most overlooked points by folks.

Getting this right is important for you to have an accurate return and stay out of future IRS trouble.

As you know, every taxpayer must answer the crypto question on Form 1040.

2023 Form 1040 crypto question

This question is very broad and captures a lot. Therefore, If you deal with crypto, it's very hard for you to say "No" to this question.

That said, there are 3 clear situations where you can safely check "No" for the question despite dealing with crypto.

Situation 1: You just hodled crypto during 2023; no other activity.

Situation 2: You transferred crypto from one wallet/exchange account you own to another wallet/exchange account you own (Transfers).

Situation 3: You purchased crypto using USD.

Situation 2 is very important and comes with some nuances you should pay attention to. Transfers are clearly not taxable. You can also check "No" for the question as discussed above. However, sometimes you have to spend crypto (like ETH) to transfer funds from one exchange/account you own to another. Spending crypto like ether to initiate gas is a taxable transaction. This means you have to check "Yes" for the question and file Form 8949 with gain/loss coming from the ETH spent on gas.

(The IRS does seem to care about these tiny gains/losses apparently)

In summary, transfer transactions themselves are not taxable and you can check "No" for the crypto question. However, if the transfer involves a gas or a similar fee where you have to spend crypto, that transaction is taxable and you have to check "Yes" for the question.