Turbotax is forcing me to take an incorrect deduction. I'm trying to report MISC income. It's forcing me to take a business deduction for it. it's not business income.

[Anonymous]

Turbotax is trying to force me to take an incorrect deduction. I'm trying to report 1099-MISC income. It's NOT business income. It's NOT employment income. It's income for Crypto rewards/staking.  Coinbase recommends filing a 1099-MISC. If I use a 1099-MISC, Turbotax forces me to call it employment income or business income. If "business income," it forces me to take a "Qualified business deduction."  This is wrong and inaccurate. I have been on the phone for hours and everyone I have spoken with has been completely useless. SHAME on this company for making it impossible for its customers to accurately report their tax income and forcing them to move heaven and earth to even attempt to do so. I'm ready to hire CPA.

I hope someone here has a better explanation.

[KrisD15]

When you are entering the 1099-MISC, be sure to select "This was a manufacturer's incentive payment" on the "Does one of these uncommon situations apply?" screen. 

The Income will be listed on Schedule 1 as Other Income. 

"Staking rewards are an incentive that blockchains provide to participants. Each blockchain has a set amount of crypto rewards for validating a block of transactions. When you stake crypto and you're chosen to validate transactions, you receive those crypto rewards."

Source 

[Pebbles2]

This is the best answer I've seen yet on the subject!  Thank goodness.  I've seen two schools of thought in the TT forum.  Either 1) Enter as 1099-MISC, or 2) enter as less common income, 1099-A or 1099-C. 

Regarding suggestion 1):  If you just put it down as MISC income, you have to answer yes or no to whether you intended to make money.  Of course you intended to make money!  Just like when you earn interest anywhere.  But saying "yes" to the intent question taxes it like earned income with the attendant taxes.  Boo hiss.  If you choose option 2), you need to ignore the TurboTax warning "Do not enter income reported on Form 1099-MISC."(Emphasis is Turbotax's.)

KrisD15's answer is awesome.

[boavalos]

Hi, can I ask what you decided to do?  I am also having this issue with the 2022 taxes.  Of course I intended to earn income but it was fully passive, not self employed and do not want to pay an additional self-employ tax.  Thanks for the feedback.

[DawnC]

If you answer YES to the question Was this an intent to make money?  TurboTax is going to put that income on Schedule C and self-employment tax will be generated.  You must answer NO to that question to get the income to show up as ''Other Income'' not subject to self-employment tax.   Hobby Income and passive income are taxed as Other Income (no self-employment tax).      @boavalos  

[Pebbles2]

To answer boavalos question, I followed KrisD15's guidance. 

[KrisD15]

When you are entering the 1099-MISC, be sure to select "This was a manufacturer's incentive payment" on the "Does one of these uncommon situations apply?" screen. 

The Income will be listed on Schedule 1 as Other Income. 

"Staking rewards are an incentive that blockchains provide to participants. Each blockchain has a set amount of crypto rewards for validating a block of transactions. When you stake crypto and you're chosen to validate transactions, you receive those crypto rewards."

@boavalos