Yes, the cryptocurrency mining would be added to income as either a hobby or a business as explained by our awesome Tax Expert @JohnB5677.
Since you are not sure if this will become a business right now, you should make that decision as you move through 2022. To be considered a business for tax purposes the IRS uses the following guidelines.
- The IRS safe harbor rule is that if you should have a profit in at least three of five consecutive years, the IRS will presume that you are engaged in it for profit and expect you would file as a business.
If you know you will have gains and tax liability you should file quarterly estimated tax payments. The key is to eliminate underpayment penalties.
This guidance can help.
In general, you may owe the penalty for 2022 if the total of your withholding and timely estimated tax payments didn't equal at least the smaller of:
1. 90% of your 2021 tax, or
2. 100% of your 2020 tax. Your 2020 tax return must cover a 12-month period.
NOTE: Higher income taxpayers.
If your adjusted gross income (AGI) for 2020 was more than $150,000 ($75,000 if your 2020 filing status was married filing separately), substitute 110% for 100% in (2) above.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
