Hi everyone! As tax filing due dates get closer, I wanted to ask about taxes for crypto mining and trading crypto. 2021 was my first year involved in crypto so I am a newbie to all this.
What sorts of things related to crypto do you have to declare on your taxes? Crypto mining? Buying Crypto? Selling Crypto? How does that work?
Also, wasn’t one of the major reasons crypto became so popular was that the government is not able to regulate it? How can the government know if you mine crypto or trade crypto, and don’t report it?
capital gains. other than that, nothing crazy to worry about on your tax return. I started an LLC to right of miners and utilities and office space to save me in the end
No sell or exchange to another coin or used to buy anything, no capital gains / loss reporting.
Mining with coins transferred from pool to your wallet (your control), other income on 1040 and used for future basis.
It is best if you talk to a tax professional. The advice giving online by most people is just the things that they think they know. It does not mean it is correct, no mater how much they think they are right.
Some of the responses you received are partially correct. When you mine crypto it is income when it is mined and it is considered income at that point. You can deduct your others expenses from this income.
The basis is the value of what you mined, when you mined it. If you transfer or dispose of the crypto you will have capital gains and losses.
All crypto is traceable and traceable because of the nature of the blockchain that records all transactions related to it. With governments having the ability of getting information for specific transactions from certain business or individuals through court orders, they can figure out who really owned it over time.
The penalties for not answer the questions on the tax return can be very large if they go after you. Not doing this like reporting properly for n your fbar is a $50k per occurrence and in most cases is way more then the tax due.
But it is always your choice to play audit roulette! This is not tax advice and you should always check with a professional.
You can also use a tracking service like Cointracker You simply connect your wallets to their service, and at the end of the year, you pay a fee based on the number of transactions you had, and they do the taxes for you.
Although it is true that they track your transactions they do not file you tax returns. Many services have issues where multiple of the same transaction is imported and it takes time to correct these issues. Price for a service like this is also important.
They basically give you a file that you can give to your account or import into a tax program. This information is in the proper format to fill the required form for your tax return.
They also do not track your mining. They only track the crypto once it hits your exchange. It will not recognize it as mining income
Yes and no. It is true, they won’t actually file the taxes for you, but they complete the forms you need to file, so each year, I just print off the forms and hand them to the person doing my taxes. I don’t have issues with duplicate transactions, and the few times I have had duplicates show up, it is as easy as telling it to ignore one of the transactions or deleting it all together. They don’t track the mining, but the coins will go somewhere, and you can put in any wallet address, so it will either track it automatically, or you download a csv file at the end of the year from wherever you are mining, and upload it. All my mining income automatically shows up as mining in the program.