Will a 1099-B form work best for reporting bitcoin purchases and sales?

Answer

How to report bitcoin transactions depends on how they are classified.  

Here is some TurboTax guidance to help you decide where to report transactions:

It depends whether your cryptocurrency was considered earned income or treated as property sales. We can help you figure out what to do.

Cryptocurrency received as payment for goods and services is taxed as earned income

If you earned money by providing a service or selling something, you’d have to report it as earned income (either wages or self-employment income) as if you’d been paid in cash.

Cryptocurrency sold, exchanged, spent or converted, is treated as sale of property

Like property sales or the sale of stock, any gain or loss from the sale or trade of cryptocurrency is reported as a capital gain or loss. If you buy and sell it within 12 months, it’s treated as a short-term capital gain. If you hold it for over 12 months, it’s taxed at the lower, long-term, capital gain rates.

Cryptocurrency received as income, and then held and sold for profit, is taxed as both

If you were paid in cryptocurrency, you’d first pay taxes on the earned income. Then, if you later sold it for a profit, you’d pay the capital gains tax (short or long-term, depending on how long you held it). You’d also need to keep track of the value it had when you got it, and when you sold/used it.

As an example: If you were paid in cryptocurrency on Monday, and then used it to pay for something else on Friday, you’d have to know what it was worth during both days in order to calculate if you needed to report a gain or a loss. In this case, it would be like paying for something with stock instead of cash.


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Yes. If you were paid in Bitcoin or another cryptocurrency, you should report your earnings as income (like you would if you had been paid in cash) .

If you hold Bitcoins or other cryptocurrencies as a capital asset, you must treat them as property for tax purposes. If you sold them for profit, you must report earnings regardless of whether or not you received a 1099-B.

Keep in mind: If you've already filed a return that reported a cryptocurrency, make sure that you categorized it correctly. If you need to make a change, check how to amend a return.


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