How do I report promotional cryptocurrency received in 2020 if it's considered income, not capital gains.

[CCantrellAZ]

If I enter the free coins received in the cryptocurrency section, it affects the outcome of capital gains. I need to add it as income, but I'm not sure what to call it when adding it as income.

[AnnetteB6]

If you are still holding the promotional cryptocurrency in your account, then you do not report it on your tax return as a capital gain transaction until you either sell it, exchange it, spend it, or convert it to dollars.

To report the fair market value of the cryptocurrency received in an airdrop following a hard fork, it is included as Other Income and will be shown on Form 1040 Schedule 1 Line 8.  

When you do use it in a taxable transaction, your basis in the cryptocurrency will be the amount that was included as income on your return when it was received.    

See the following TurboTax article for more information:  How is cryptocurrency like Bitcoin taxed?

[edited 4/11/2021 | 12:17 pm PST]

[CCantrellAZ]

I don't think that is accurate. Everything I've read online from the IRS specifically states that cryptocurrency received free from a promotion, airdrop, etc., needs to be reported as "income" so it cannot be includes in the cryptocurrency section in TurboTax, it needs to be reported in the "stocks, bonds, mutual funds" section. I need to know how to report it in that section. Please look into this and get back to me. Thank you!

[CCantrellAZ]

Just to further clarify, promotional cryptocurrency or airdrops cannot be entered into the cryptocurrency section on TurboTax because that section includes everything entered as "capital gains". Promotional cryptocurrency (such as that received from Coinbase Rewards program) needs to be included as "income" even if you're still holding it per IRS guidelines. 

[AnnetteB6]

Thank you for the clarification, I will update my previous answer accordingly.

To report the amount of income received from the promotional cryptocurrency, use the following steps:

• Go to the Federal > Income section of your return
• Scroll to the Less Common Income area
• Click Start or Update beside Miscellaneous Income, 1099-A, 1099-C
• Click Start or Update beside Other Reportable Income
• Enter a short description and the amount of income you are reporting

The amount reported will be included on Form 1040 Schedule 1 Line 8.

@CCantrellAZ

[CCantrellAZ]

Thank you so much for the update. I went to that section and it asks if I received a 1099-MISC. The IRS only requires exchanges to give a 1099 if the amount received was at least $600. Since mine was only about $40, I didn't get one of these forms. If I answer that I didn't get one, it moves on and doesn't let me list the $40 income.  Does this mean that if it's less than $600, I don't have to claim it? I was looking into that question like lottery winnings, but even that seemed unclear without a 1099. I wish the IRS was more clear, but if anyone can help clarify, I would really appreciate it. I'm not trying to go through the hassle of an IRS audit, and I'm not trying to hide anything. 

[DianeW777]

It's important to be sure you are in the right section as noted by @AnnetteB6.  I've added a couple more steps and an image to show the entry point.

1. Scroll to the Less Common Income area
2. Click Start or Update beside Miscellaneous Income, 1099-A, 1099-C
3. Scroll to the bottom to select Other reportable income > Click Start or Update/Revisit beside Other Reportable Income
4. The next screen will ask only for a short description and the amount of income you are reporting - enter the information
   • Crypto Promo - $40
5. See the image below (if you are married you will see a box for each spouse, select the correct box and enter the amount)

[All14terrain]

This was very helpful. However the TurboTax software is asking for the cryptocurrency exchanges TIN/EIN. How can we file the promotional bonuses if we don’t have a 1099 provided to us? Is there a way to find the TIN? 

[ErnieS0]

You don't need a TIN/EIN @All14terrain if you report your cryptocurrency bonus as Other Tax Income as Tax Experts @AnetteB6 and @DianeW777 said. Do not try and enter a 1099 if you don't have a 1099.

Follow @AnetteB6's suggestions:

• Go to the Federal > Income section of your return
• Scroll to the Less Common Income area
• Click Start or Update beside Miscellaneous Income, 1099-A, 1099-C
• Click Start or Update beside Other Reportable Income
• Enter a short description and the amount of income you are reporting

[All14terrain]

Thanks @ErnieS0. I followed those instructions, however, when the software takes me through the smart check, it says I have an error on my return and states that I must provide the payer's TIN....EIN... Do I need to obtain the EIN/TIN and input that?

[MarilynG1]

If you are following the path under Wages & Income, scroll all the way down the page to Less Common Income > Miscellaneous Income 1099-A, 1099-C > Other Reportable Income.

This is where you can report any type of income; yard sale, babysitting, etc. that is not reported on any official income document.

You don't need an TIN/EIN to report this type of income. You may want to delete your current entry and re-enter. 

[All14terrain]

Thanks @MarilynG1. Deleting it and re-entering worked like a charm! The smart check now says there are no errors! Thanks so much!! Relieved a lot of stress for me!

[Katina S]

We are glad to hear that worked for you! Thanks for reporting back!

@All14terrain