How does a business report digital asset transactions?
Digital assets, including cryptocurrencies, must be reported if received, sold, or exchanged for products or services in the course of business. Many taxpayers forget to report digital asset transactions because they don’t involve traditional currency, but all business-related transactions must be reported as income.
Example: A customer's S corporation received 0.5 Bitcoin for consulting services. This transaction must be reported as income at the corporate level.
TurboTax Desktop
Select Business Info and select About Your Business.
On the Confirm Your Business Information screen, select Continue.
On the About Your Business screen, select Continue.
On the Payments Requiring a 1099 screen, select No.
On the Any Digital Asset Transactions screen, select Yes.
Answer the following prompts to enter your digital asset transaction details.
TurboTax Online
Select Business Info then select Uncommon Situations.
Under Miscellaneous tax situations, check the box for Received or sold digital assets (including crypto or NFTs) or interests in those assets as a reward, payment, or exchange. Then select Continue.
In the left menu, select Federal then select Income.
Follow the screen prompts and report the fair market value of your digital assets as ordinary income.
When your S corporation receives cryptocurrency as payment, the fair market value of the crypto at the time of receipt is considered ordinary income.
This income should be reported on your Form 1120-S or 1065.
The fair market value is the price a willing buyer would pay a willing seller in an open market.
