BlockFi does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, nor should be relied on for, tax, legal or accounting advice. You should always consult your own tax, legal, and accounting advisors before engaging in any transaction.
Figuring out how to pay taxes on your crypto can be frustrating. BlockFi is dedicated to helping clients manage their crypto wealth, this includes providing efficient tax reporting support.
BlockFi Interest Account (BIA) holders earn market leading interest rates on their crypto. Earning crypto income is understood to be a taxable event in the eyes of IRS, the chief tax regulator in the United States. The IRS has determined that cryptocurrencies are generally treated as property for tax purposes – other forms of property include commodities such as gold and the stock of public companies. BlockFi’s tax advisors have therefore determined that crypto interest paid to clients is a payment of property, subject to reporting via a form called a 1099-Miscellaneous or “1099-MISC.”
1099-MISCs are generally used to report amounts paid to recipients like BlockFi’s clients who are not employees of the payer (BlockFi). Recipients of these forms need to include them with their annual tax return. Clients who use tax service preparation software will typically be asked if they received any 1099s or other income. Otherwise, clients can give the form to their professional tax preparers.
In the last week of January, BlockFi will mail 1099-MISC forms to clients who earned $600 or more of interest and bonuses in 2019. These forms will also be made available electronically upon request. The value of the income earned will be in “Box 3” of the form, for “Other Income.” This value is based on the USD value of the interest & bonuses paid to clients as of the effective date of each monthly payment – these amounts are also reflected on each client’s monthly BIA statements. Further, these amounts also become the cost basis for the crypto income, an important input if the crypto is sold after receipt.
In accordance with IRS requirements, clients who earned less than $600 in interest and bonuses will not receive a 1099-MISC, but should still report any crypto income amounts on their tax returns.
As always, clients should consult their tax advisors for information relating to their specific facts and circumstances. For more information on leading crypto tax solutions, see our post here For everything else, contact BlockFi anytime at firstname.lastname@example.org.
– The BlockFi Team