You may have received coins through an airdrop, dividend, interest, or staking, rather than buying or trading for them. Read on for information on how best to label these transactions and how they are taxed.
ZenLedger has different transaction types to distinguish the type of transaction for the coins you received. These transactions are all essentially Incoming, which means that they were sent into your account from an external source and you didn't buy or trade for them. If these transactions import into ZenLedger labeled as 'Incoming' then you can leave them labeled that way, unless you would like to change the transaction type to further distinguish the transaction type. Either way you choose, they will be taxed in the same way as taxable income.
How are these types of transactions taxed?
Transactions labeled as 'Incoming', as well as all of the transaction types listed below, are taxed as taxable income and appear on the IRS Form Schedule 1. For each of these types of transactions, you will have to file income tax upon coin reception, and file a gain or loss when you sell the asset. The cost basis for the transaction will be based on the fair market price of the asset at the time that the coin is received. A summary of these transaction totals broken down by type can be viewed on the Taxes page by scrolling down to the bottom and finding the Taxable Income box on the right side of the page.
Transaction Type Labels:
Airdrops are crypto coins given to you from known or unknown sources. Many crypto startups use airdrops as a marketing method as a means of promotion and to raise awareness of their coin. Airdrops can be legitimate or fraudulent. If you have received an airdrop that is fraudulent, you can mark that transaction as 'Ignore' in ZenLedger.
Staking Rewards are coin rewards you get from staking your token on a daily/monthly or other timely basis. Similar to airdrops, you will file income tax on staking rewards reception, and file a capital gain or loss when you sell the asset.
Dividend Received transactions are distributions of a crypto company's earning to coin holders.
Interest Received transactions are income paid to lenders by a crypto company.