(gentle music)
- Cryptocurrency is all the rage these days,
and you need to know that it is taxable.
Uncle Sam knows about it, the IRS put guidance out in 2019,
don't think you can get away with this.
Lisa Greene-Lewis, CPA and TurboTax expert
is with us right now to help us walk through
how it's taxable.
So Lisa, you said basically,
it comes down to how you use it.
- Yes, that's the main thing I think about that helps me,
and hopefully it helps people understand how it's taxed.
The way you use it is how it's taxed,
so if you hold onto it as a capital investment
and then you sell it,
it would be taxed as a capital gain or loss
just like if you sold your stock.
If you're paid, people are actually getting paid for job,
on their job, in crypto.
So if you're a W2 employee and you're paid,
it's going to be the income that's going to be on your W2.
If you're paid in Bitcoin
or virtual currency as a contractor,
it's going to be reported on your Form 1099.
So, that is just how I think about it.
- It's the right way to do it though, right?
And it makes sense to me.
And if you're a miner, if you mine cryptocurrencies,
you are ostensibly self-employed,
and you treat it as self-employed income then, correct?
- Yes. If you end up mining
and you get more Bitcoin,
then it would be self-employment income.
- The one big thing we haven't talked about in the past
is what happens if I make a purchase with Bitcoin?
How is that taxed?
- Yeah, so if you make a purchase in Bitcoin,
you will recognize a gain or loss,
and that will be based on the fair market value
of whatever you're receiving.
So the difference will be the cost
of your Bitcoin that you're trading,
and then the fair market value of what you're getting.
So I think of it as, the latest,
people are able to buy a Tesla with Bitcoin.
So say you bought that Bitcoin for $6,000
and the Tesla is worth $42,000.
You are going to be recognizing a gain on the difference
of the $42,000
and the $6,000 Bitcoin that you bought.
- Yeah, interesting that the dollar
still plays a role there, right?
We're not getting rid of it yet.
And finally, you had said there's a new box
on the tax return that I have to check?
- Yeah, so the Form 1040,
the IRS has you check
whether or not you've had virtual currency transaction.
- Lisa, if I actively trade cryptocurrency,
how do I keep track of all this?
Because people are in and out of these things all day long.
- Yes, so TurboTax Premier gets after the pain points
that traders have.
So you can actually import
and upload your stock transactions,
up to 1,550 of those transactions at once.
And then cryptocurrency,
you can import and upload 2,250 transactions at once.
- Lisa, there's so much new for 2020,
where does a taxpayer go for help?
- So, TurboTax has proactive guidance
related to the events that occurred in 2020,
but if you have questions,
you could connect live via one-way video
to a TurboTax live tax expert,
they can either guide you along the way, or new this year,
you can fully hand over your taxes to them
all from the comfort of your home.
- Lisa Greene-Lewis, CPA, TurboTax expert.
Thank you for helping us through that.
- Thank you.