Crypto IRS reporting rules

This year is my first time doing crypto mining therefor unsure about IRS rules. Do we report to IRS when we sell Chia or do we have to report mined Chia as per the price of that day (which will be extremely difficult to keep recording in pool)?

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What country are you in?
Rules differ alot.

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This is not financial, tax, nor legal advice. I’m assuming you’re in the U.S. when you mention our beloved I.R.S. so I can say that my CPA indicated that when crypto currency is awarded it’s considered property, so poof, a asset as been acquired and has the value set at the specific moment it was awarded.

Profits or losses are not taxed against the asset until it’s sold.

I really recommend finding a good CPA (ask around at local businesses to see who they use) and talking with them.

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Yes, I am in USA. So how you are recording its value when you acquired it in case you are getting them from pool daily like .01 etc?

If you use an exchange or trading platform they will provide or should provide a 1099-MISC for the I.R.S. (USA) … that if it exceeds like $600 a year if I recall correct… so earnings from staking, mining, etc

Some countries also imply a tax if you use a trading platform and consider you a professional trader then e.g. Belgium.

All those KYC demands have reasons, that’s for those exchanges/trading platforms to comply with countries where they deliver their services and report to IRS or alike at various countries. (Prime example Coinbase)

But there is way more than just that … cryptocurrency is seen as capital assets for the US , so you could use form 8949 if you lets say bought and made a loss https://www.irs.gov/pub/irs-pdf/f8949.pdf however your gains are also listed and official then… now form 1040 is kinda same as above but not detailed/lined out just a sumary of it https://www.irs.gov/pub/irs-pdf/f1040sd.pdf

If you are purely holding on a private wallet (you own your keys, not an exchange or custodial wallet), none will ever know you hold crypto until you want to exchange or trade through a ‘legit’ platform.

I might be Belgian but having a Delaware LLC does require me to follow up US IRS stuff …

This would be great for the early Chia block winners who can claim value of $1500-2000 at the time of award and then a pretty big loss at current prices. In fact it might actually make sense to sell that early Chia at a “big loss” just to reap the tax deduction on other profit. Disclaimer: also not a CPA lol

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I agree. While my award time value wasn’t nearly that high we’ll just have to see where it’s at by the end of the tax year. I may sell near the end if it keeps dropping to take it off the taxes.

Oh, also not CPA advice, but it was also mentioned to me that as an individual the cost of the hardware can’t be claimed and depreciated, but if a business purchased the hardware for farming it can be depreciated as computer equipment. Again, not CPA advice.

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I’m not pooling so I just check the logs daily (like that’s not depressing) and if a miracle happens I check the time of award against the value on one of the websites then log that in a spreadsheet. For other crypto stuff that’s done on Exchanges I use a paid subscription to CoinTracking.Info to track all that. I do wish Chia would move forward to get on the Exchanges and registered with sites like CoinTracking.Info. If they don’t do something soon other coins are going to beat them out of existence.

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Correct somehow as business, but then you have to declare everything, the VAT/tax paid surplus on hardware gets deducted from the corporate tax bill, the base value is a write off over eg 3 years accounting wise

Biz wise, deducting tax is simply trying to get a 0 tax on eg sales or other revenue you did with your biz … so it’s wise to well get as much as possible expenses so you get a return or if you are break even.

However there is also a downside, if you need a credit line or loan from a bank it will be difficult if you get always a return or are at break even tax wise … But for that there are fiscal constructions but you need at least 2 LLC minimum … with fiscal constructions you can rotate the tax owed to the IRS inside the company… and that’s perfect legal as weird as it sounds

Solo business, so eg a single self employed person, also possible to avoid a lot of taxes but you have to invest it into pension funds, insurances etc … which bring it also down to a not to pay or a possible return from the IRS

If anything I say here is wrong feel free to correct me, but afaik this is all correct as I’m doing it also and it works… without issues

Good you start this debate, and indeed as is mentioned in other comments, it highly differs per country.

Here in the Netherlands, we make a clear distinction between mining activity and capital accumulation.
Mining is a non-taxable event and more seen as a non-profitable hobby (as per the latest I read about it), and any gains that may accrue on the crypto assets in your fiscal year simply count to your capital gains (just like stocks or other capital accumulation).

Therefore, I am really happy that in my pool (Spacefarmers.io) there is a distinction between the value of your mined coins and the value due to HODLing your Chia (i.e. capital accumulation). Suits my needs :+1:

For an example of how that looks, see for example our top farmers payouts page https://spacefarmers.io/farmers/423e56a5eeb83d754d875f61978a7d2b99923177e14569b94e82b20abe36f8f5#payouts

I went over this at a summary level in a video not long ago and it is important. As is wallet support that allows us to integrate with tax software!

And here is an excellent resource on that topic as well.