The answer is it can be considered business, hobby, investment, or personal income property. All depends on your intent.
Cryptocurrency 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.
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, 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) . Non-miners go to "Personal", "Investment
Income", "Stocks, Mutual Funds, Bonds, Other", select NO
to the 1099-B question, and record each transaction with the date you moved the
coins, for how much, when you acquired them, and for what. Choose Other
as the category. You can't take a loss on personal items (if you used
cryptoccy to purchase goods and services) which you report those under
Other/personal items/other. 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.
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?
**I don't work for TT. Just trying to help. All the best.
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