How to report Bitcoin payments to a C Corp?

[dkh1]

My C Corp started to accept Bitcoin in 2020 for some digital products we sell.  We did a small number of transactions that amounted to a few hundred dollars.  We never converted it to USD and it is still just sitting in the wallet.  With the current rise in Bitcoin it has also appreciated. 

I understand that Bitcoin is viewed as an asset, not currency, and I get the rules for reporting for individuals but I'm less clear on how these Bitcoin transactions and the account itself gets reported for a C Corp.  I'm hoping someone can explain what needs to be reported, what gets taxed and when.

[Opus 17 · Accepted solution]

Every time you receive a bitcoin payment for a product or service, you report that as income using the US$ exchange rate at the time.  It’s no different than accepting payment in barter or in a foreign currency. You report the revenue at the days US exchange rate.

Then, if you make payments from your cryptocurrency wallet for “ordinary and necessary business expenses“, you can deduct the business expenses at the day’s exchange rate in US$.  

Whenever you sell the cryptocurrency or convert it to US dollars, you report a capital gain.

[DJS]

You may find this IRS guidance helpful: 

Q11.  How do I calculate my income if I provide a service and receive payment in virtual currency?

A11.  The amount of income you must recognize is the fair market value of the virtual currency, in U.S. dollars, when received.  In an on-chain transaction you receive the virtual currency on the date and at the time the transaction is recorded on the distributed ledger.

This is taken from the following IRS site: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-curren... 

[tagteam]

The following is another resource.

https://www.irs.gov/irb/2014-16_IRB#NOT-2014-21