New to Mining, looking for Tips/Advise

[kirbyrj]

That's a pic using Nicehash back in 2017. That $7 a day back then is worth $25 a day now. Personally, I'm mining to hold until I retire. I'm not looking for a quick influx of cash.

In 15 years you'll find me on a golf course down south instead of posting in a hardware forum .

 

[III_Slyflyer_III]

Out of curiosity (although I'll ask when I do taxes later this year anyway); do you need to report coins earned ONLY if you exchange them for REAL money? (similar to how you report stock earnings only if you sell or dividends are paid). Or do you have to report the BTC earnings even if they have not realized real cash value yet?

 

[Archaea]

Out of curiosity (although I'll ask when I do taxes later this year anyway); do you need to report coins earned ONLY if you exchange them for REAL money? (similar to how you report stock earnings only if you sell or dividends are paid). Or do you have to report the BTC earnings even if they have not realized real cash value yet?

They tax you twice.
When you earn it/mine it - it’s gross income - you pay even if you don’t convert to USD. Pay the rate of conversion to USD at the time you took mining distribution.

When you sell it or trade it to USD, it’s treated like stock and you pay gains tax on it. Long term or short term.

https://taxbit.com/blog/2019-10-21-irs-guidance-on-cryptocurrency-mining-taxes/

you can mine directly to your private wallet and not disclose - but if you plan to hold it for years then good luck selling it or USD or on an exchange without coming clean. If you try to buy stuff with it from a online shop just know that if they report the previous crypto purchase history you might get burnt there too. (Think parallel to buying tax free from Newegg, where they went back one year and charged everyone tax on USD purchases). If you want to keep it private you’ll probably need to mine to an offline wallet and sell to private parties like on the forum here.

I think the tax arrangement is crap.
But that’s the law.

 

[III_Slyflyer_III]

So technically, you could be paying taxes on something that is worthless unless you cash out right away, in which case, you get taxed again?

Wow that seems silly. I could see when converting to USD for sure, but BTC (along with other coins) is a variable nightmare of changing value that technically means nothing unless you actually take the cash out. Otherwise you are trading something of "virtual" value with no real bank/government backing. Maybe it's not even worth stepping into this mess...? lol.

 

[Archaea]

So technically, you could be paying taxes on something that is worthless unless you cash out right away, in which case, you get taxed again?

Wow that seems silly. I could see when converting to USD for sure, but BTC (along with other coins) is a variable nightmare of changing value that technically means nothing unless you actually take the cash out. Otherwise you are trading something of "virtual" value with no real bank/government backing. Maybe it's not even worth stepping into this mess...? lol.

Yes. And that’s why it’s dumb.


I dont think very many people report their mining income.

You can take that for what you will.

if you don’t report anything along the way, then you’d owe the full tax amount if you cashed it out. Which is currently maxed out at 45% in the US I believe.

So let say you mine a single BTC and report nothing and that BTC hits $100,000,000 when you decide to cash it all out. You’d owe $450,000k in taxes when you convert to USD in that top tax bracket. You couldn’t prove it was long term gains since you didn’t claim mining profit along the way. So it would not be taxed at the 10% long terms rate. That’s my understanding anyway. And it may be wrong. In this scenario you'd likely have helped yourself to report it along the way.

But if it went to 0 you weren’t taxed along the way - which of course you come out ahead.

I will be reporting mine for 2020 tax as I did for 2019 tax. But only because they bluntly ask the question on the current IRS tax form as generically as possible if you were involved in any aspect of crypto. Sounds like a gotcha if you answer no.

I also have decided I will only report the mining income dispersement as it come to my private wallet — not as the many different small disbursements that are paid to my pool account. I’m not taking possession of it till it hits my wallet. Much less dispersement info to try to track that way. I can easily see when the single amounts that I manually control and initiate hit my Ledger wallet, and even have some control over what date/price I move the amount to my wallet (and so have to pay tax on).

 

[sgrinavi]

Coinbase's cold storage options seems plenty strong. 48 hour stall with various approvals being required to initiate and complete.

Coinbase is a fairly good option for just that reason, there is a lot of responsibility keeping your crypto on a hardware wallet. I had some friends temporarily lose their entire wallet on a ledger upgrade who, buy the way, were recently hacked.... They have my phone number and email addy....

And, if you need to trade your crypto fast it does not move fast enough off a hardware wallet, it could cost you thousands.