Double counting interest earned through Celsius Network

[Lee7007]

I earned interest in 2021 through holding cryptocurrency on Celsius Network.

I did my cryptocurrency taxes through TokenTax, which included my transaction history from Celsius Network, and imported my documents to TurboTax. But after I added my 1099-MISC I received from Celsius Network, it increased my taxes by about $1,000.

I'm confused that my taxes increased, because I thought my interest gains were already accounted for through importing from TokenTax. 

Can anyone provide me some direction?

[RaifH]

TokenTax should have imported your Cryptocurrency Mining & Income Tax Report which should duplicate the information found on your 1099-MISC. Any trading activity should be reported separately. 

Since it sounds like the income from your 1099-MISC was for interest earnings and not mining, you want to make sure it is entered correctly on your tax return. 

1. With your return open, go to Federal > Wages & Income
2. Open the Less Common Income section and start or revisit the last entry, Miscellaneous Income, 1099-A, 1099-C.
3. On the next screen, start/revisit the very last entry, Other Reportable Income, and answer Yes on the following screen.
4. On the next screen, enter a description (for example, "Crypto Interest") and then enter the total USD amount.
5. You may repeat this for every currency for which you received interest or combine them on a single line.
6. Select Continue when finished.

If you already see an item in the Less Common Income section, this may have come from the TokenTax import. Make sure not to enter it in the Self-Employment section if the income is not from mining as this will add self-employment taxes. 

[Lee7007]

Thanks for your help! I went through the steps you provided and it didn't seem to correct the issue, but when I deleted everything and reimported my TokenTax document and 1099-MISC, it seems to calculate the correct tax.

I had a new issue come up when I tried to finalize my TurboTax document. This is the message I received:

Form 1099-Misc Worksheet (Celsius Network LLC): A Link to Schedule C, Schedule F, Form 4832, or the Other Income Statement must be entered. To associate this amount with the proper tax form double-click on the field provided or check the box for the form you want to link this amount to.

Can you please advise on how to resolve this?  

[RobertB4444]

This should link to the Other Income tax statement.

[Lee7007]

I added this successfully in "Other Income."

However, it added about $600 to my taxes. Can you explain why my taxes went up for reporting crypto interest on my 1099-MISC when those gains were already reported through importing Token Tax's 1099-B statements?

[ThomasM125]

Form 1099-B would only report the sale of investments, not interest paid on your virtual currency holdings. It is likely that the interest reported on your 1099-MISC form is not duplicated on the form 1099-B that you received.

[Lee7007]

When I prepared my crypto taxes using TokenTax, I imported a file from Celsius with the detailed transactions and interest gained in 2021.

I opened my 1099-B section in TurboTax and confirmed that it listed my interest earned from Celsius.

For resolving this issue, would one of the following solutions work?

1. Should I not file my 1099-MISC in TurboTax, because this interest is already accounted for in my 1099-B section?

2. Should I not have imported my Celsius file when calculating my crypto taxes with TokenTax?

[JohnB5677]

I am not aware of an area designated for interest on the 1099-B input screen.  Interest is taxed differently than Capital Gain, so it should not be included with the Crypto sales.

You should delete any postings in the 1099-B area that indicate "interest". and then post the statement separately for the interest.

[Lee7007]

The interest I received through Celsius was in the form of cryptocurrency.

From my understanding, I needed to import my Celsius cryptocurrency gains in the 1099-B area because when I sell my cryptocurrency earned at a future date, the IRS will need to know where I received it.

If I deleted my postings in the 1099-B where I earned cryptocurrency as interest, will it create problems for me if I sell my holdings later on?

[RaifH]

No, this will not create problems in the future. It sounds like Celsius is importing all transactions to the 1099-B. As @JohnB5677 correctly said, this is not where your miscellaneous income should be reported, and you should go through your 1099-B before you import it to TurboTax and delete any transaction that is marked interest. 

You will then report that interest using the method as miscellaneous other income as outlined above using the 1099-MISC that Celsius sent to you. That way it will only show up once on your tax return, in the correct area. 

You will want to keep track of your cost basis and acquisition dates of all your holdings, either through your own records or through Celsius or other third-party software. For example, if you received interest in 2021 and reported that using the 1099-MISC, you will want to keep track of the date you earned that interest and the value in US dollars at the time it was earned. That way if you later sell it in 2022, you know how much to report as a gain or loss and whether it was long-term or short-term.

[Lee7007]

Thank you to everyone who responded! I appreciate your insight with my tax issue. 

[Kmnapoli2]

I earned interest in 2021 through holding cryptocurrency on Celsius Network.
After I entered the 1099-Misc 

there are few questions that I don’t know how to answer.

1) Did the crypto interest involve work that’s like Monica’s main job?

which one is the correct answer

yes or no

2)did the crypto interest involve an intent to eran money?

yes or no

[Kmnapoli2]

I had a new issue come up when I tried to finalize my TurboTax document. This is the message I received:

Form 1099-Misc Worksheet (Celsius Network LLC): A Link to Schedule C, Schedule F, Form 4835, or the Other Income Statement must be entered. To associate this amount with the proper tax form double-click on the field provided or check the box for the form you want to link this amount to.

Can you please advise on how to resolve this?  

[RobertB4444]

@Kmnapoli2  To the first two questions-  unless your main job is trading in cryptocurrency this did not involve activities like your main job. 

If you were trying to make money at the activity as opposed to just having a hobby then it is subject to self employment tax.

When you are linking the 1099-MISC to another form it will either be linked to schedule C (if you were attempting to earn money through your mining) or Other Income (if it was just a hobby regardless of whether you made money).

[pazimzadeh]

Following these instructions leads to a page which says to enter a brief description of the income, but NOT to to enter income reported on form 1099-MISC. However, Form 1099-MISC is exactly what Celsius provides. 

The place where TurboTax suggests entering 1099-MISC is Self-Employment, however when I entered my Celsius earnings the self-employment section my taxes due did not increase, suggesting it is not being taken into account.

Thanks in advance for your help,

paz