Quote from: dontListen2me on June 17, 2011, 06:56:30 PM

This appears to be a topic not normally considered here.

If I am mining in any one of the the United States, what tax forms should I file?
Am I my own business? Is Sole Proprietorship assumed by the government?
If mining is considered a business, does anyone have instructions for how to arrange one's situation to be properly legal?

If mining is not considered a business, and taxes should be filed, does someone know what to do, or where to find advice?

If I were to take a stab in the dark I would guess that the default answer is pay out the wazoo and ask a lawyer.
I just really don't want to be audited. Never have, and I'm not trying to either.

Thanks for any help provided.

I am a tax professional and although it obviously hasn't come up in tax court yet, here is my take. Bitcoins are not recognized as a currency or store of value yet, so it should be perfectly acceptable to treat any bitcoins you own as if they didn't exist when it goes time to file your taxes. However, by that logic when you cash in your bitcoins for dollars you need to claim 100% of that as income. Similarly if you trade the bitcoins for merchandise you would need to claim the fair value received as income.

Treat your mining operation as a schedule C business. Take section 179 for all your computer equipment (it's a tax write off for 100% of the cost instead of depreciating it over its useful life). Keep track of all your mining expenses separately from any personal expenses so you have a nice clear set of records in case the IRS comes snooping around. If your mining is done at home it is tricky, but come up with a fair allocation for utilities for the house as a whole to allocate to your business. If you own your home you can also take a tax write off for the depreciation on the percentage of the house used for mining.

I have lots more tips, but I tend to ramble when I'm not sure if anyone is listening so I'll stop for now.