Should crypto income with form 1099-MISC go into Schedule B or not? Turbo tax doesn't know how to handle this income

[RandomDude34345]

just to clarify TurboTax treated this income as self employed and calculated self employed tax on top of income tax. In reality it's just an interest income paid in crypto that is considered a property and therefore is given MISC form instead of INT form. Can I just put this income to schedule B with all other INT forms? 

[ColeenD3]

Crypto income reported in Box 7 1099-Misc is business income and is entered on Schedule C. You can't take amounts on 1099-Misc and call them income from 1099-B.

Q-13: Is a person who in the course of a trade or business makes a payment using virtual currency worth $600 or more to an independent contractor for performing services required to file an information return with the IRS? A-13: Generally, a person who in the course of a trade or business makes a payment of $600 or more in a taxable year to an independent contractor for the performance of services is required to report that payment to the IRS and to the payee on Form 1099- MISC, Miscellaneous Income.

IRS Notice 2014-21

[RandomDude34345]

Thank you for your answer. Would the reply change though if I have income reported in the Box 3 "Other income". Again the nature of the income is just at interest earned on deposit made and not any work performed like mining or anything like that. 

[GiseleD · Accepted solution]

You have the option of contacting the payer and seeing if they will re-issue this on a 1099-INT. However, they probably will not. Considering the nature of the crypto space, you're lucky you received a tax form, period. Sounds like staking income, but without details, I can't be sure of the specifics.

Absent a 1099-INT, I strongly recommend going with self-employment income on this. The upside to this is that you can deduct ordinary and necessary expenses against this income. In your case, maybe you had a TradingView or other technical analysis software membership that you relied on when researching this asset. Maybe there were fees from the exchange on which this income was earned. Maybe you had a membership to a trading group. All these are common expenses in the crypto space. If so, you can deduct these against this income if you report it as self-employment. 

@RandomDude34345

[RandomDude34345]

This is great and makes a lot of sense. Thank you for your response. 

[GiseleD]

Glad I could help!

@RandomDude34345

[widestrides]

I have this same problem. I have income from staking crypto on a 1099-MISC with the amount in Box 3. I do not want to and should not have to pay 15.3% Self-Employment tax on top of ordinary income tax! This is NOT self-employment and I do not have any expenses to deduct.

Turbo should provide a checkbox exemption for crypto staking like they do for prize winnings and lawsuit awards, etc.

I'll see if the Exchange will reissue me a 1099-INT, but otherwise I will just report it as Miscellaneous Income like my other staking income for which I was not given a 1099 even though it was well over $600.

I realize the IRS may come knocking about the 1099-MISC form that they received and I didn't file. There's just no way this is self-employment. That would be like interest from my bank being self-employment and subject to self-employment tax.

[FangxiaL]

Please follow these steps to report 1099-Misc as other income:

1. Open or continue with your return
2. Click on Show more next to Other Common Income under Income & Expenses section
3. Click on Start next to Form 1099-MISC
4. Select Yes to the question Did you get a 1099-MISC?
5. On the next screen, enter the information on the 1099-MISC form you received. The amount should be reported in Box 3 as Other income 
6. Answer the questions on the screens that follow. When you get to the screen that says Did the xxx involve an intent to earn money? Select No, it didn't involve an intent to earn money.
7. Continue, then Done.

@widestrides

[widestrides]

On the 1099-MISC instructions for reporting the amount in Box 3:

Box 3. Generally, report this amount on the “Other income” line of Schedule 1 (Form 1040) and identify the payment. The amount shown may be payments received as the beneficiary of a deceased employee, prizes, awards, taxable damages, Indian gaming profits, or other taxable income. See Pub. 525. If it is trade or business income, report this amount on Schedule C or F (Form 1040).

[widestrides · Accepted solution]

Thanks for your reply. I did that but it still put it as self-employment income and added 15.3% Self-employment tax.

[widestrides]

There was no question about intent to earn money. (And I did intend to earn money as it was an Interest program.)

There was:

"I didn't actively participate in the operation of this business." 

[FangxiaL]

Did you try to enter the 1099-Misc through Other Common Income section instead of Self-Employment section? You can enter the 1099-Misc form in both sections, but one will take you to the self-employment taxes and the other lets you report it as other income.

[widestrides]

Yes, I did, but it still puts it into Self-Employment, even if entered in the Other Common Income, Form 1099-MISC section.

[widestrides]

If I call it Prize Winnings or Awards, it doesn't go as Self Employment. That's the only way to get TurboTax to get it right for me. These are called Staking "Rewards," so it sort of fits.