I asked a similar question in the past and never got a solid response and they finally removed my question completely. I don't think Turbotax guys have the knowledge in answering this question and most likely this post will also be removed.
In fact I couldn't find anything on the net directly addressing core issue here. I believe most of the guys who buy contracts skip paying taxes on such cases because IRS didn't care to clarify this 🙂
Here is what I believe should happen - when you bought the contract for $ 5000, consider it as buying some good with shipment dates into the future. As you get payouts (as if batches of goods arriving), you will track the price of crypto as on those dates and deduct from your original contract (doesn't matter if you reinvest or take payment out). Until you reach the 5k value you are not making any money and therefore no taxes. Your cost basis will be the prices as per dates of payouts. Once you cross above 5k, you will start reporting those as income and pay taxes on those payout even if you don't sell them.
I am no tax expert, but I don't see any reason why IRS would want to deduct your taxes until you make money on the contract. You are not mining and therefore it is not a hobby for you. You purchased a service from someone who does the mining as a business.
