Entries for Crytpo Income and Crypto Capital Gains

[cdnbum88]

Last year as a hobby got into crypto mining for fun. I have made some money and have utilized Koinly an online site that I uploaded or API'd all my mining transactions and sales.

I got a download file (schedule D and 8949) that I have uploaded to TurboTax. 

It shows my minimal capital gain, but I thought I need to show the income straight up $Xk on line 8 for Schedule 1 along with schedule D/8949 that I imported?

Is this a correct assumption? If yes, I cannot seem to do a new entry on that schedule for the income part of my mining and can't zoom back to a form to enter either.

Any guidance would be appreciated.

[JohnB5677]

Yes, in addition to the Schedule D for the sale of Cryptocurrency you will also be claiming income for your mining operation.

If you earn cryptocurrency by mining, it counts as part of your regular taxable income. You owe tax on the entire fair market value of the crypto on the day you received it, at your regular income tax rate.

Crypto mining can be taxed as either a Hobby or a Business

To post as a Hobby:

With your return open, go to Federal 

1.  Wages & Income
2.  Less Common Income
3. next to Miscellaneous Income, 1099-A, 1099-C
4. Select Other Reportable Income
5. Answer Yes on Any Other Taxable Income? Screen
6. Continue through the interview

To Post as a Business:

If you have a business, it can be entered directly into the business income section of the return.

[cdnbum88]

Thank you for that reply.

So if my Koinly report shows I made $7k and there is no upload file, I add that to other income (line 😎 as I did and then my capital gains of 146 from schedule D/8649 which I did get file from Koinly and uploaded and is reflected. 

So I think I am in good shape. 

May have to see how this year goes and may have to change to business. If that is the case can that be declared in 2023 tax preparations next year or would I have to determine know to allow for quarterly taxes and what not?

Sorry for the second question in a question.

[DianeW777]

Yes, the cryptocurrency mining would be added to income as either a hobby or a business as explained by our awesome Tax Expert @JohnB5677.

Since you are not sure if this will become a business right now, you should make that decision as you move through 2022.  To be considered a business for tax purposes the IRS uses the following guidelines.

• The IRS safe harbor rule is that if you should have a profit in at least three of five consecutive years, the IRS will presume that you are engaged in it for profit and expect you would file as a business.
  • IRS Bulletin - Hobby or Business?

If you know you will have gains and tax liability you should file quarterly estimated tax payments.  The key is to eliminate underpayment penalties.

This guidance can help.

In general, you may owe the penalty for 2022 if the total of your withholding and timely estimated tax payments didn't equal at least the smaller of:

1. 90% of your 2021 tax, or

2. 100% of your 2020 tax. Your 2020 tax return must cover a 12-month period.

• Form 1040-ES 2022 

NOTE: Higher income taxpayers.

If your adjusted gross income (AGI) for 2020 was more than $150,000 ($75,000 if your 2020 filing status was married filing separately), substitute 110% for 100% in (2) above.