The act of crypto trading or the act of crypto mining are taxable events. Review the information below to see how you should report your crypto transactions.
If you purchased Crypto and did not trade any then there is nothing to report until a tax year where you actually trade it. Then we have crypto mining which is different. If you have done mining, then you are considered to be self employed and this income is reported as though you were in business as an independent contractor.
Reporting for Mining:
- For US tax, mining is an income producing activity and is therefore classified as a business.
- Most home miners will report their activity on a Schedule C. The mined coins will be reported as income and any associated expenses, such as utilities and depreciation of requisite fixed assets will be included.
The definition of mining vs trading are listed below for your convenience.
Mining: The way cryptocurrencies are created - How will mining customers report their income and expenses
- Mining is the act of using various types of computer hardware and software to solve an algorithm, also known as crypto mining.
- When a miner successfully solves the algorithm, they can keep the currency mined along with some other incentives. When solved, the algorithm changes, becomes slightly more difficult and the process repeats.
- Some currencies, a home computer can mine. For more difficult currencies such as Bitcoin, computer hardware with a specialized graphical processing unit (GPU) chip or application-specific integrated circuits (ASICs) ae used.
If you decide you are mining follow the steps below to begin reporting:
- In the Search box (upper right) Type schedule c and click the Jump to link in the search results (TurboTax Online or CD/Download)
Trading: The exchange of goods/services for cryptocurrency
- The act of buying and/or selling the digital currency, as well as using it for barter (exchange for goods or services). This must be reported with or without documentation or statements. The IRS has determined that cryptocurrency is to be treated like property which means it can result in capital gain or loss.
Reporting for trading: You can aggregate your sales but separated for long term and short term. (Long term is for crypto that has been held longer than one year, i.e., one year plus one day). You can use two transactions, and you can use 'various' for the date of purchase, then select long or short term for the type of sale/trade.
- In TurboTax Online you will find Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) as a selection under Investment Income
- In TurboTax Desktop you will enter Cryptocurrency as a Stock, Mutual Funds, Bonds, Other, under Investment Income
- OR simply search for Cryptocurrency in the upper right
Form 8949 will be competed, and this, along with your detail information documents must be mailed within three days after your return has been accepted with Form 8453 as the cover sheet.
Internal Revenue Service
Attn: Shipping and Receiving, 0254
Receipt and Control Branch
Austin, TX 73344-0254
If you need a blank Form 8453, you can download this pdf, enter your address information and check the box for Form 8949 (this form is really just a cover sheet).
@snad
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