Cryptocurrency pool mining, do you record each day mined or when you receive payout?

[mryates234]

When mining cryptocurrencies in a pool, every minute you make a tiny amount of coins towards a payout.  At what interval do you record your earnings.  It reads to me in the irs and turbo tax documents that you record income when you actually receive the payment in your wallet.  Can someone confirm if I need to record every day or hour or just when I actually receive the currency into my possession?

[Opus 17]

Any income is constructively received when you can actually spend it.  Just like an office worker who earns $15 an hour but can only spend it when they actually receive a pay check (and is only taxed on the paycheck, not on hours earned but not paid yet), you record your income when the bitcoin is available to you in a form that you can use it.

However, be aware that mining bitcoin can potentially generate two separate taxable transactions.

First, you report and pay regular income tax on the value of new bitcoin that is credited to you using the value on the date it is created.

Then, unless you convert it to "real" money on the same day, you will also have a capital gain or loss transaction to report whenever you do convert the bitcoin to some "real" value (use it buy something or convert it to a recognized currency.)  Bitcoin is treated like any other asset, stock or collectible.  When you sell or cash out, you have either a capital gain or loss, that is taxed as regular income (short term gain, held one year or less) or lower long term capital gains rates (held more than 1 year.)  Your "cost basis" is the creation value that you paid tax on originally.  Then if you sell later for less, you may have a deductible loss, and if you sell later for more, you probably have a taxable capital gain.   Because cryptocurrency exchanges are not currently required to issue 1099-B statements like a stock broker does, you will need your own accurate records of your purchases and sales.  If you are audited and can't prove the price you paid, the IRS is likely to declare the entire amount to be a taxable gain.

[bortelliaa]

Thanks Opus. If I understand you correctly, I record as income ONLY the mining outputs that have been transferred to my outside wallet. The reason I'm asking this is because some pool cloud mining platforms produce daily mining output but this output is accumulated on the platform and not transferred to my wallet until it hits a minimum value.

[Khellian]

HI there,

Did you ever get a confirmation from your post of 2019 re Crypto taxing? My understanding is that the IRS position is that crypt that is mined from a platform such as Norton will only be taxed when it is moved to a wallet where you will be able to use it as "currency" whether fiat or virtual. Once it is transferred to a wallet where you can actually get at it then that is the point when it becomes taxable at the price of the date of the transfer. 

However as this is still new to be I'm trying to make sure.

Thanks 

Khellian

[DianeW777]

The mining of crypto becomes taxable when you have income on the day the coin is "created" in your account at that day's exchange value. 

Reporting for Mining:

• For US tax, mining is an income producing activity and is therefore classified as a business.
• Most home miners will report their activity on a Schedule C. The mined coins will be reported as income and any associated expenses, such as utilities and depreciation of requisite fixed assets will be included.

The definition of mining vs trading are listed below for your convenience.

Mining: The way cryptocurrencies are created - How will mining customers report their income and expenses

• Mining is the act of using various types of computer hardware and software to solve an algorithm, also known as crypto mining.
• When a miner successfully solves the algorithm, they can keep the currency mined along with some other incentives.  When solved, the algorithm changes, becomes slightly more difficult and the process repeats.
• Some currencies, a home computer can mine.  For more difficult  currencies such as Bitcoin, computer hardware with a specialized graphical processing unit (GPU) chip or application-specific integrated circuits (ASICs) ae used.

If you decide you are mining follow the steps below to begin reporting:

• In the Search box (upper right) Type schedule c and click the Jump to link in the search results (TurboTax Online or CD/Download)

Trading: The exchange of goods/services for cryptocurrency (treated differently than mining)

• The act of buying and/or selling the digital currency, as well as using it for barter (exchange for goods or services). This must be reported with or without documentation or statements.  The IRS has determined that cryptocurrency is to be treated like property which means it can result in capital gain or loss.

Reporting for trading:  You should aggregate your sales but separated for long term and short term. (Long term is for crypto that has been held longer than one year, i.e., one year plus one day).  You can use two transactions, and you can use 'various' for the date of purchase, then select long or short term for the type of sale/trade.

• In TurboTax Online you will find Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) as a selection under Investment Income
• In TurboTax Desktop you will enter Cryptocurrency as a Stock, Mutual Funds, Bonds, Other, under Investment Income
• OR simply search for Cryptocurrency in the upper right  

Form 8949 will be competed, and this, along with your detail information documents must be mailed within three days after your return has been accepted with Form 8453 as the cover sheet.

Internal Revenue Service

Attn: Shipping and Receiving, 0254 

Receipt and Control Branch 

Austin, TX 73344-0254

If you need a blank Form 8453, you can download this pdf, enter your address information and check the box for Form 8949 (this form is really just a cover sheet).

@Khellian