Do I still use schedule C if my self employment income and expenses were in the form of bitcoin?

[jaystylez561]

I had some self employment income where I was paid in bitcoin. I also made some bitcoin payments to a couple of businesses for what would be considered commissions. Would I report the income and expenses on schedule C as I normally would with cash, credit or check payments and then use form 8949 and schedule D for all bitcoin transactions with realized gains or losses?

[TomYoung · Accepted solution]

"Do I still use schedule C if my self employment income and expenses were in the form of bitcoin?"

Yes.  The IRS has made that perfectly clear.  What's somewhat unclear is whether the gain or loss you experience when you, in effect, "sell" the bitcoin in order to pay someone in bitcoin is "capital" or "ordinary" in character.  The more conservative approach - from the standpoint of possible IRS "push back" - would be to keep a small cache of bitcoin as "operating" bitcoin to be used for paying subcontractors and then possibly a larger, separate and distinct cache of bitcoin as "capital" assets.

There's also the unsettled issue if bitcoin's hard fork and the resulting bitcoin cash received constitutes an income event or not.

Keep good records, including your translations of bitcoin into US currency.

Tom Young

[maglib]

since bitcoin is FIFO, aren't most short term in nature, so it would not matter capital vs. ordinary from a simplistic standpoint unless you specifically moved coins and held separately and designated them investment, I understand they will be ordinary income for a miner.  The IRS is fairly clear about identification requirements for brokers so I would think the same rules apply.  Proper segregation and no commingling are inherent.