How to report earnings from held crypto mining

Forum|Forum|4 years ago
January 18, 2022
1 reply
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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?

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Best answer by RobertB4444

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-currency-transactions

How does the Schedule C form tie into that?

Thanks

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.

DianeW777

Level 15

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

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PhoenixShadeAuthor

Level 2

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

PhoenixShadeAuthor

Level 2

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.

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-currency-transactions

How does the Schedule C form tie into that?

Thanks