Crypto Mining or Cryptocurrency Mining, or, in its more forward contraction, Cryptomining, is not the mining that we know of today where you collect precious minerals, liquids and gases out of the earth for daily consumer, specialized, or scientific purposes which is for profit.
Cryptomining, still for profit like any other physical mining endeavor today, is a tad bit complicated to explain because of its nature but the main goal, as with a gold miner in Africa, is to make money.
Digital Mining
With its intrinsic architecture, cryptocurrency does not have a centralized governing and regulating body as does real, physical, and fiat money has a central bank in all of the countries of the world. It is a thriving entity that is supported and willingly interacted by the community it is in.
In fact, many of its users, subscribers, or members that simply trade do not know that many of their colleagues keep the cryptocurrency alive with their subtle contribution that keeps the machine going. One of these are the miners that keep the architecture sturdy and reliable.
This crypto mining is absolutely not for the people with shallow pockets because this entails a lot of resources, not just the financial kind, but also the mental know-how of the ways and means of the going through the process of completing certain valuable tasks.
First of all, there are several thousand cryptocurrencies in the world, not all are mineable, and not all are on chain. The mineable ones, however, are very dynamic and can quickly and effectively change the texture of their environment.
If one is a cryptocurrency miner in one of these mineable cryptocurrencies, then he has got to have the necessary rig, or computer hardware, to create a new cryptocurrency and put it into the encrypted ledger for their community to harness on and further their trade.
The IRS Hand
The Internal Revenue System (IRS) is the governing federal agency tasked to collect taxes on all persons, including juridical, for all the types of taxes mandated by law. Cryptocurrency mining activities are not excluded.
The federal government has filtered the mining activity into two types: a hobbyist miner and a business miner where both are expected to pay taxes but on different levels. The time, effort, expertise, and resources, among a few, are the indicators to identify one from the other.
In both cases, one is required to report the mined crypto and ascertain the fair market value at the exact time and date when one received the crypto for it to be recorded as ordinary income that is taxable.
In both instances as well, report on deductions incurred during the mining activity is considered and allowed by the IRS but, obviously, in two different magnitudes. One has a higher percentage tax on income than the other.
When in complications on the filing of your tax returns, especially with cryptocurrency added in the list, try to think of getting a more experienced hand in that field, Jackson Hewitt. The name is known, and its reputation is not a sore in your finger or pocket. Give them a try.
