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You have two different income streams to consider.
When you mine the coins, you have income on the day the coin is "created" in your account at that day's exchange value. You can report the income as a hobby or as self-employment. If you report as a hobby, you include the value of the coins as "other income" on line 21 of form 1040. Your ability to deduct any expenses is limited -- expenses are itemized deductions subject to the 2% rule.
If you report as self-employment income (you are doing "work" with the intent of earning a profit) then you report the income on schedule C. You can fully deduct your expenses (if you can prove them) (see later). The net profit is subject to income tax and self-employment tax.
Your second income stream comes when you actually sell the coins to someone else for dollars or other currency. Then you have a capital gain (if they were worth more when you sold them than when you mined them) or you have a capital loss (if they are worth less when you sell them). And the gain or loss will be taxed differently if it is a short term gain (you held it one year or less) or long term (more than one year). You will need to keep track of each coin you create (date, value) and when you sell it (date and value).
And of course, if you immediately sell the coin for cash, then you only have income from the creation, you don't also have a capital gain or loss.
Now, as far as expenses are concerned, if you are doing this as a schedule C business, you can take an expense deduction for computer equipment you buy (as depreciation, subject to all the rules) and your other expenses (mainly electricity, maybe a home office). But you need to be able to prove those expenses, such as with a separate electric meter or at least having your computer equipment plugged into a portable electric meter so you can tell how much of your electric bill was used in your business. Unless your expenses are very high, they won't offset the extra self-employment tax, so you will probably pay less tax if you report the income as hobby income and forget about the expenses. (On the other hand, if you report it as self-employment and pay SE tax, that adds to your credits in the social security system which may allow you to qualify for a higher retirement benefit. Having self-employment income on schedule C also allow you to claim some tax deductions like an IRA that you can't claim if all your income is hobby or "other" income. So there may be benefits to paying SE tax in the long run.)
If you earn more than a couple thousand dollars per year you will need to think about making estimated tax payments as well.
If you are really getting spendable coins committed to your wallet more often than once a day, you have a recordkeeping problems for sure.
Be aware that cryptocurrency is not anonymous -- the ledger is public. As soon as you give a bank account number to an exchange to cash out your currency, your entire transaction history forever is vulnerable to the IRS if the subpoena the exchange. So it is to your long term advantage to be as honest as you can, within the limitations of the system.
Also here's another issue, when someone dumps coins on yobit for btc, eth etc and then moving it to cryptopia to hold for the so called "hard forks" instead of coinbase. And then after a year they move it to coinbase to sell for USD. How are taxes treated for this? Is his gain/losses going to be calculated from when he moved the coin to coinbase or from when he got it on yobit?
(The same thing applies to any asset; if your granddad bought a pack of baseball cards for 25 cents and gave you one that turned out to be worth $10,000, then your capital gain will be $9,999.75.)
I think most commentators (at least the ones I tend to follow) agreed that the exchange of one cryptocurrency for another was a taxable event even before your noted change. It just makes sense and follows the spirit of IRS notice 2014-21. Attached is just one article:
<a rel="nofollow" target="_blank" href="https://www.thetaxadviser.com/newsletters/2017/apr/cryptocurrency-taxes.html">https://www.thetaxadvi...>