Crypto Reporting and PayPal 1099-K

[tim10]

I mined and sold crypto in 2021. All of my sales were deposited to my PayPal account. I received a 1099-K from PayPal.

Do I need to enter my transactions from my crypto walled (Coinbase) as well as the 1099-K from PayPal or does the 1099K suffice to report everything?

Also do I enter the 1099-K under Miscellaneous income or under "1099-MISC and Other Common Income" 1099-K section?

[HelenC12 · Accepted solution]

If all of your taxable crypto transactions are on your 1099-K, yes, you can that form for reporting purposes.  

Cryptocurrency is taxed when you receive it as payment or have a transaction where you sell or trade it. If you just buy it and hold onto it, it won’t be taxed until you do something with it.

As for where to enter your crypto in TurboTax, it depends whether your cryptocurrency was considered earned income or treated as property sales.

Cryptocurrency received as payment for goods and services is taxed as earned income:

• If you earned money by providing a service or selling something, you’d have to report it as earned income (either wages or self-employment income) as if you’d been paid in cash. 
• See How do I report income from self-employment?

Cryptocurrency sold, exchanged, spent or converted, is treated as sale of property:

• Like property sales or the sale of stock, any gain or loss from the sale or trade of cryptocurrency is reported as a capital gain or loss. See How do I report Bitcoin or other cryptocurrency as a capital gain?
• If you buy and sell it within 12 months, it’s treated as a short-term capital gain.
• If you hold it for over 12 months, it’s taxed at the lower, long-term, capital gain rates.

Cryptocurrency received as income, and then held and sold for profit, is taxed as both:

If you were paid in cryptocurrency, you'd first pay taxes on the earned income. Then, if you later sold it for a profit, you'd pay the capital gains tax (short or long-term, depending on how long you held it). You'd also need to keep track of the value it had when you got it, and when you sold/used it.

As an example: If you were paid in cryptocurrency on Monday, and then used it to pay for something else on Friday, you'd have to know what it was worth during both days in order to calculate if you needed to report a gain or a loss. In this case, it would be like paying for something with stock instead of cash.

[tim10]

@HelenC12 Thank you for your reply!

I am wondering where I should be reporting the income, under the 1099-K section or miscellaneous income. I saw somewhere that it should be filed under miscellaneous income, because I have crypto reported on the 1099-K as well as eBay sales.

[JohnB5677]

There are really two transactions here. @HelenC12 Gave you excellent guidance.

1. You are correct, The income you received from mining is considered earned income, and will be posted to Miscellaneous income.  I suspect that that may be what is on the 1099-K. How do I report income from self-employment?
2. In addition you will have to post the sale or exchange of any of the cryptocurrencies.   How do I report Bitcoin or another cryptocurrency as a capital gain?