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kottkech
New Member

I traded bitcoin in 2017 and received a 1099-K as my total transactions exceeded $20,000. Where do I report earnings? 1099-K doesn't seem right as it wasn't a business.

 
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2 Replies
HelenC1
Expert Alumni

I traded bitcoin in 2017 and received a 1099-K as my total transactions exceeded $20,000. Where do I report earnings? 1099-K doesn't seem right as it wasn't a business.

If you hold Bitcoins or other digital currencies as a capital asset, you must treat them as property for tax purposes. If you sold them for profit, you must report earnings regardless of whether you received a 1099-B.

Additional informationBitcoin and Cryptocurrency Help Center

Capital gains are reported as part of Schedule D. Schedule D is included in TurboTax Premier, Self-Employed, and TurboTax Live (online versions) and in Deluxe, Premier, and Home & Business (CD/Download versions).

(If you're in Free Edition or Online Deluxe, you will have to upgrade to Premier.)

We'll automatically generate and fill out Schedule D when you report 1099-Bs and other capital asset sales.

Here's what you need to have ready:

  • When you acquired the coins and how much you paid.
  • When you sold the coins and how much you received.

These amounts must be in US dollars.

You must do this for every trade you made. If you bought coins at different prices or sold partial amounts, then you must keep track and record the difference of what you sold.

Once you have your figures:

  1. Open (continue) your return in TurboTax.
  2. In the search box, search for investment sales and then select the "Jump to" link in the search results.
  3. Answer Yes to the question Did you sell any investments?  (If you land on the Here's the investment sales we have so far screen, select Add More Sales.)
  4. Continue following the onscreen instructions and we'll calculate the gain or loss from the sale. Note: There isn't a specific section for digital currency, but if you answer the questions related to sales, we'll be able to do the proper calculation.
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maglib
Level 11

I traded bitcoin in 2017 and received a 1099-K as my total transactions exceeded $20,000. Where do I report earnings? 1099-K doesn't seem right as it wasn't a business.

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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