How to report earnings from held crypto mining

[PhoenixShade]

I've been trying to figure out how to properly report my earnings here. I dabbled a little bit into Cryptomining last year, not many transactions and not much--little enough where the fact that I have to pay Turbotax extra to file it means I made basically nothing, so using a paid service to file make something I can import is something I'd really prefer to avoid if I can.

I earned a little bit from mining. Have the transaction history in its entirety along with how much each transaction was worth. I haven't sold anything, it's all still in my wallet the same as the day it was added. The 1099-B page that the help directs you to seems to be for if you sold the currency, which isn't the case here, so what's the appropriate way to add in held gains for Crypto?

[DianeW777]

If you are actually mining crypto then follow the instructions below and TurboTax Online Self-employed or TurboTax CD/Download Home & Business.

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

• 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.

If you do decide that you are actually Trading see how to report below.

• 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 

[PhoenixShade]

Thank you for the swift response!

As a follow-up, on the schedule C is that more appropriately "Other Self-Employed Income" or "Uncommon Income"? Also is it safe to assume the values of the crypto at the time of receipt needs to be aggregated into one value instead of itemized for each transaction?

Thanks

[DianeW777]

If this is the only Schedule C you are using then it would be the main income for this activity.  And, yes, you would aggregate one value for one transaction date for the same type of crypto.  The detailed transactions should be maintained with your tax records.

[PhoenixShade]

Great, thank you. Just to make sure I understand everything that's going on:

Q44 on the IRS's FAQ:

https://www.irs.gov/individuals/international-taxpayers/freque[product key removed]ions-on-virtual-c...

How does the Schedule C form tie into that?

Thanks

[RobertB4444 · Accepted solution]

If you decide that you are mining cryptocurrency as a hobby and not as a business then you would report the mining income as regular income on form 1040 schedule 1.  If you are mining cryptocurrency as a business then you would report is on Schedule C.

There are advantages to both ways.  Schedule 1 income results in no self employment taxes but you are unable to deduct expenses against hobby income.  Schedule C income does result in self-employment tax but allows you to deduct the expenses related to datamining.

If the datamining has resulted in significant gains then the IRS will almost certainly view it as an income producing activity and expect it to be entered on schedule C.

[PhoenixShade]

That makes perfect sense, thank you.

As I only made ~$150 off of mining, like I said small scale, and don't plan on claiming any expenses as deductions, what would be the appropriate method of reporting it on 1040 Schedule 1 using Turbo Tax online?

Thanks!

[ThomasM125]

To report hobby income, follow these steps:

In the Federal section of TurboTax online:

  1. Income and Expenses

  2. Less Common Income

  3. Miscellaneous Income, 1099-A, 1099-C

  4. Hobby Income and expenses

[Basement_Buzzard]

I did this, but Turbo Tax review flags failing to fill out Schedule "C" as an error.

If this is hobby mining why would Schedule "C" even pop up?

If your filing schedule "C" what are you using for a business code ? 999999?

[ErnieS0]

Did you get a 1099 @Basement_Buzzard? TurboTax will take you to Schedule C unless you tell TurboTax "This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby (this is not common)" in the 1099-NEC section.

If you are reporting hobby income, you do enter your income and expenses directly without entering a 1099:

1. Type "hobby income, loss" in Search in the upper right
2. Select "Jump to hobby income, loss"
3. Say YES to Do you have hobby income or expenses for 2021?
4. Enter you hobby income and expenses

You can no longer deduct hobby expenses on your federal return, but those expenses will carry over to state, in case you state allows a deduction.

[Basement_Buzzard]

The IRS just lost its case in US Federal Tax Court regarding taxes on crypto mining & staking!

Ruling: Mining & staking are NOT considered current income until they are sold.

This makes sense if the IRS is to be consistent with defining Crypto as property.  Crypto earned through mining or staking is NOT income. It was argued that it is "created property" and therefore, not taxable till it is sold. The IRS just had to refund the income taxes paid to a Tennessee couple for this very reason.

[4Mula]

The victory was a breakthrough, but not definitive.  First, it was only on staking, not mining for proof of work and other paths.  Second, the IRS offered to refund the individual, but not to make a ruling or re-interpretation for all who file.  They will take their suit forward to work for a ruling, but it will be some time. https://www.yahoo.com/now/irs-waves-white-flag-lawsuit-132200079.html?guccounter=1&guce_referrer=aHR...