Where do I report my gains for Cryptocurrency mining as a business while self-employed. I input all mining income, but what about selling income as capital gains?

[jsherman417]

I'm trying to add my gains info to turbotax for my cryptocurrency mining. I know there are 2 streams of income for it, first is the straight mining income, which is added the second the coin is mined. I added that to business income, but how do I add/calculate the income of selling the coin, either as a gain or a loss? I know if it's personal I'd use a 1040 Schedule D, but since I'm claiming the mining as a self-employed business, I'm not sure where to put it.

I'm using TurboTax Home and Business

[maglib]

you can still claim it as sales of investment assets or you can claim it as sales of business inventory.  If it's short term, it won't matter which category you utilize.

Lots of details that you seem to already understand:

Cryptocurrency is considered property by the IRS and every move (spending, exchanging, selling, income if paid to you for services, etc), within the tax year is a recordable transaction. Cryptocurrency held for investment has a gain/loss. Cryptocurrency for personal property is only gains, no losses (so for purchases of goods and services, there is only gains, no losses as they are personal). If paid to you for personal services, it is considered reportable income at the spot rate on date of receipt. It can be considered business, hobby, investment, or personal income property depending on your intent to make a profit to consider it a business.

To reports gains/losses allowed (NOT FOR MINERS, miners report as self-employed on schedule C using Turbotax Self Employed https://ttlc.intuit.com/replies/4944762 or as hobby income(hobby is as if you are not in the business of making money, and doing it on the side, normally area if you do not plan on being profitable for at least 3/5 years) https://ttlc.intuit.com/replies/5675605 and the cryptoccy for them is as if they produced and sold inventory,Miners can also sell the inventory using the same sales of invesments section see below non-miners, since it’s short term sales, it has no impact if you use inventory method or sales of investments. they have income immediately at the spot rate upon mining of the currency, they have expenses of producing for schedule C or as itemized deductions, every move even to a similar coin is taxable event (they are not subject to 1031 exchange due to numerous IRS rules that they fail to meet including 1031 must be US property) then they sell that inventory unless they held for investment purposes, to decide if a hobby or self employed use IRS guidelines https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses, ).

Non-miners to reports (miners can use too since ST has same impact).

1.     Select the Federal tab

2.     Select Wages and Income 

3.     Select Investment Income

4.     You'll list each trade/sale in the Stocks, Mutual funds, Bonds, Other interview 

5.     When asked Did you get a 1099-B or a brokerage statement for these sales? select No 

6.     When asked to Choose the type of investment you sold select Everything else for held for investment, if held for personal goods choose Personal Items.

7.     Translate proceeds of each sale into US dollars at the time of the sale or movement.

8.     Repeat for each transaction or report summarily.

Record each transaction with the date you moved the coins, for how much, when you acquired them, and for what.  You can't take a loss on personal items (if you used cryptoccy to purchase goods and services) which you report those under personal items. Cryptocurrency for investment purposes is recorded as Everything Else. Make sure only personal use cryptocurrency is recorded in the personal Items section.

You can report transactions in summary for the year as investments LT vs ST and Personal LT vs. ST for 4 categories of reporting. You can use various for the date of purchase and 12/31/17 as date of sale.

https://www.irs.gov/pub/irs-pdf/p544.pdf and  https://www.irs.gov/pub/irs-pdf/i8949.pdf  are the IRS rules for property and reporting.  Personal property net losses are not deductible but investment property is....  follow the IRS guidelines for property.

IRS guidance on cryptocurrency as property:

https://www.irs.gov/newsroom/irs-virtual-currency-guidance 

https://www.irs.gov/pub/irs-drop/n-14-21.pdf 

If you have a large number of transactions, there are a few tax reporting softwares to help you out to get proper bottom line such as bitcoin.tax and TT does not support any of their accuracy. Do note that I understand that these softwares are treating it all as investment grade so they may not be completely accurate as personal use does not allow losses.

I hope this was helpful?

https://www.cnbc.com/2018/01/30/cryptocurrency-and-taxes-what-you-need-to-know.html

1031

Does not qualify for like kind exchange, they don't use a QUALIFIED INTERMEDIARY nor do they make a written election at time of exchange. Plus no form 8824 filed.

IRS RULES: To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the case of a taxpayer simply selling one property and using the proceeds to purchase another property (which is a taxable transaction).  Rather, in a deferred exchange, the disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property.  Taxpayers engaging in deferred exchanges generally use exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations. .

The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary.  However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient. 

Replacement properties must be clearly described in the written identification.  In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified. 

How do you report Section 1031 Like-Kind Exchanges to the IRS?
You must report an exchange to the IRS on  Form 8824, Like-Kind Exchanges and  file it with your tax return for the year in which the exchange occurred. 

Form 8824 asks for:

Descriptions of the properties exchanged
Dates that properties were identified and transferred
Any relationship between the parties to the exchange
Value of the like-kind and other property received
Gain or loss on sale of other (non-like-kind) property given up
Cash received or paid; liabilities relieved or assumed
Adjusted basis of like-kind property given up; realized gain
If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions.

Add this to the fact the currency is not US real property in the United States and property outside the United States are not like-kind properties.

[jsherman417]

So I read through all that, but I'm still not sure where I should put in the gains/losses difference from the mining. I put in the mining income (the value of the coin when I first mined it) as General income on my Schedule C, but the gain/loss from the sell is where I'm hung up. Where can I claim it as a sale of investment asset as you say? Also how could it count as a business inventory as you were saying?

[maglib]

you can put the sale as a sale of inventory in the self employment or you can book them as regular sales in the normal personal section as a sale of an investment. It won't matter since they are all short term gains, they get taxed as ordinary income.  Whichever method you find easiest. Most tell you to put them within the investment section as described above.   You would track the currency as inventory you made if you wanted the Schedule c inventory method which may add too much complexity.
No different then if I was an active trader, I can still use the investment sales and use schedule C for business expenses.  You created income...  now you have the related p&l on those assets/inventory items.

Non-miners to reports (miners can use too since ST has same impact).

1.     Select the Federal tab

2.     Select Wages and Income

3.     Select Investment Income

4.     You'll list each trade/sale in the Stocks, Mutual funds, Bonds, Other interview

5.     When asked Did you get a 1099-B or a brokerage statement for these sales? select No

6.     When asked to Choose the type of investment you sold select Everything else for held for investment, if held for personal goods choose Personal Items.

7.     Translate proceeds of each sale into US dollars at the time of the sale or movement.

8.     Repeat for each transaction or report summarily.