How do I report Cryptocurrency Mining income?

[JJS1]

Here is my question about this whole mess. Let’s say I use a “cloud mining” service website to mine bitcoins. Where I physically am not mining anything on my end. Do I still have to report the income the day the coins are created(which is daily), or, since they are not yet in MY personal crypto wallet and not in my complete control UNTIL I withdraw them from my balance on their website, can I just report the value on the day I withdraw them to my personal wallet where I have control over and will sell them for USD IMMEDIATELY, (for no hassle of capital gain calculations)? I mean, I think it is silly to report cloud mining earnings each day especially since they are not yet in my control and the website can be a total scam and take my cash and coins and run/shut down / etc. which there is NOTHING stopping them from doing that. Also, they give the option of CONVERTING your mined coins for more “hashpower”, instead of withdrawing them. I guess what I am wondering and I am sure a lot of people are ...can I do this...???
Pay them a fee for hashpower to mine coins, then each month like clockwork, convert 75% of the coins to more hashpower (reinvestment) , and then withdraw the other 25% to my wallet on Coinbase to sell immediately for USD. In turn only reporting that USD each month as profit/income? With a cost basis if zero?

[JJS1]

Here is my question about this whole mess. Let’s say I use a “cloud mining” service website to mine bitcoins. Where I physically am not mining anything on my end. Do I still have to report the income the day the coins are created(which is daily), or, since they are not yet in MY personal crypto wallet and not in my complete control UNTIL I withdraw them from my balance on their website, can I just report the value on the day I withdraw them to my personal wallet where I have control over and will sell them for USD IMMEDIATELY, (for no hassle of capital gain calculations)? I mean, I think it is silly to report cloud mining earnings each day especially since they are not yet in my control and the website can be a total scam and take my cash and coins and run/shut down / etc. which there is NOTHING stopping them from doing that. Also, they give the option of CONVERTING your mined coins for more “hashpower”, instead of withdrawing them. I guess what I am wondering and I am sure a lot of people are ...can I do this...???
Pay them a fee for hashpower to mine coins, then each month like clockwork, convert 75% of the coins to more hashpower (reinvestment) , and then withdraw the other 25% to my wallet on Coinbase to sell immediately for USD. In turn only reporting that USD each month as profit/income? With a cost basis of zero? What form would I need to report this, if this is an ok way for Uncle Sam ?

[Ivan_Sirko]

you mention estimated taxes.  I have mined enough that I believe I will owe more than $1000, so you are saying I MUST(?) file a quarterly return, or I should?  I am currently just investigating; do I file Self-employment as business or just claim the income as hobby.  It is a dedicated machine running for the purpose of generating income.  

And to take it further, I had solar panels installed on my house to make my mining green, and help offset the high electric demand from mining, so can I deducted the cost of the solar panels, or a portion of them?

Thank you

[JWag]

Hello. If you mine with a pool and the pool pays you out in crypto to your wallet is it taxable at that point? Or, do you have to sell or convert that crypto before it is taxable? In other words, if you mine 2 Ethereum, do you have to pay taxes on the value at the timing of payout, or is it NOT taxable until sold? Thanks for the info in advance!

[MarilynG]

If you are paid in crypto for mining, it's considered taxable earned income.

It’s treated as a property sale, and the earnings are capital gains, when you sell it, spend it, exchange or convert it.

Click this link for more info on How is Crypto Taxed?

[rcbisme]

Where in Turbo Tax (Home and Business) do I enter (type in)  "Hobby Income"?

I entered it in self-employment tax, (because I could find that) as one lump sum for BTC and HNT together.

It would be nice to break it down if there is a place to enter it that way.

[ErnieS0]

Here's how to enter hobby income in TurboTax Home & Business CD/Download @rcbisme.

1. Select the Personal tab
2. Then Personal Income
3. Go to Less Common Income
4. Start Miscellaneous Income, 1099-A, 1099-C
5. Select Hobby income and expenses

[rcbisme]

Thank you for the path the Hobby Business.  I took it out of self employment and put it in Hobby Business.  I didn't have a related deduction in self employment.  When I moved it from Self Employment to Hobby Business my Green Federal Refund amount went down.  Does it matter which place Crypto Mining Proceeds should go?

[JohnB5677]

Crypto Mining as several have said earlier can be either hobby or a business depending on how you do it.  However, if the activity is a hobby, you will report the income on Schedule 1, line 8 of Form 1040. The income won't be subject to self-employment tax, but you won't be able to deduct expenses associated with your hobby.

The self-employment tax rate is 15.3%. That rate is the sum of 12.4% for Social Security and 2.9% for Medicare.