New guidance will probably come out in 2018 but for now:
Cryptocurrency, bitcoin, ethereum, etc is considered property by the IRS and every move (spending,
exchanging, selling, income if paid to you for services, etc), within
the tax year is a recordable transaction. Cryptocurrency held for
investment has a gain/loss. Cryptocurrency for personal property is only gains,
no losses (so for purchases of goods and services, there is only gains, no
losses as they are personal). If paid to you for personal services, it is
considered reportable income at the spot rate on date of receipt. It can be considered business, hobby, investment, or
personal income property depending on your intent to make a profit to consider
it a business.
To reports
gains/losses allowed (NOT FOR MINERS,
miners report as self-employed on schedule C using Turbotax Self Employed https://ttlc.intuit.com/replies/4944762
or as hobby income https://ttlc.intuit.com/replies/5675605 and the cryptoccy for
them is as if they produced and sold inventory, they have expenses of producing
for schedule C or as itemized deductions, then they have income for the receipt
of the cryptoccy at spot rate on production, then they sell that inventory
unless they held for investment purposes LT,decision for hobby vs. self employed https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses) . Non-miners to reports gains/losses to the extent allowed go to
type "Investment Income" without the quotes in the search box, select
"Investment Income, gains & Losses" and choose to JUMP TO,
It will ask if you sold any invesments, say yes, select NO to the 1099-B
question, Choose "Personal Items" for crypto used for personal
purposes, or Everything Else for crypto held for investment purposes. Record each transaction
with the date you moved the coins, for how much, when you acquired them, and
for what. You can't take a loss on personal items (if you
used cryptoccy to purchase goods and services) which you report those under
personal items. Cryptocurrency for investment purposes is recorded as
Everything Else. Make sure only personal use cryptocurrency is recorded in the
personal Items section.
You can
report transactions in summary for the year as investments LT vs ST and
Personal LT vs. ST for 4 categories of reporting. You can use various for the
date of purchase and 12/31/17 as date of sale.
https://www.irs.gov/pub/irs-pdf/p544.pdf and https://www.irs.gov/pub/irs-pdf/i8949.pdf are the IRS
rules for property and reporting. Personal property net losses are not
deductible but investment property is.... follow the IRS guidelines for
property.
IRS guidance
on cryptocurrency as property:
https://www.irs.gov/newsroom/irs-virtual-currency-guidance
https://www.irs.gov/pub/irs-drop/n-14-21.pdf
If you have a large number of transactions, there are a few tax
reporting softwares to help you out to get proper bottom line such as
bitcoin.tax and TT does not support any of their accuracy. Do note that I understand
that these softwares are treating it all as investment grade so they may not be
completely accurate as personal use does not allow losses.
I hope this
was helpful?
https://www.cnbc.com/2018/01/30/cryptocurrency-and-taxes-what-you-need-to-know.html
**I don't work for TT. Just trying to help. All the best.
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