I mined crypto between 2018-2022 that was not reported and sold in 2024. Can I report the sale in 2024 with zero cost basis and not have to amend 5 years of tax returns?

[heyengel]

I mined crypto between 2018-2022. I vaguely remember the tax reporting rules being different back then and was treated similar to stock assets which were reported at the time of realized gain/loss. Long story short, the mining “income” was never reported and I sold a big chunk in 2024. Would it be possible for me to report the sale in 2024 with zero cost basis? I would really rather not have to amend 5 years of tax returns. IMO, whoever came up with these rules to tax unrealized gains on a highly volatile asset class is making things more complex and confusing than it has to be. “We are in this together, but only when you are making money.”

[Vanessa A]

No.  Whatever happens in a tax year must be reported on that years tax return.  You cannot include income or losses (other than carry over losses) from prior years on a current year return. 

If you were supposed to include income on the returns in those years, you would need to Amend Your Return for those years. 

As you stated the tax rules for those years were different.  So you would need to use the software for that particular year to amend to have the proper tax treatment of your income. 

[heyengel]

It appears that the IRS only allows amendments 3 years after the original filing, so the amendments are not going to work either.

[JamesG1]

IRS Notice 2014-21 Frequently Asked Questions addressed 'mining'.

Q–8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?

A–8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.

The IRS would say that the income would be reported in the year of the date of receipt.  In addition, 'mining' income may also be subject to self-employment income.

Consider contacting a tax professional who is experienced in these issues.

@heyengel 

[heyengel]

Hi @JamesG1, my post was not asking about current mining rules, but regarding mining rules between 2018-2022, and how to move forward from my current situation.

I can consult someone who is knowledgeable, do you have any referral? I've searched Google and have not found anything related to my case, which is why I'm posting here.

[JamesG1]

I apologize that my response was unclear.  

IRS Notice 2014-21 was issued by the IRS in 2014 and appears to be the IRS position for the period of 2018-2022.  As well as today.

A Google search of 'crypto tax accounting companies' returns responses.  Best wishes.

@heyengel