I mine Ethereum on a pool, and I'm credited with a share in my pool wallet a few dozen times per day.
It could be argued that each credit is a "taxable event," as I have "possession" of the coins as soon as I am credited (though I can't liquidate it until it's "cashed out" to a proper wallet).
To file tax accurately, I'd need to track and document the current USD value for each of these miniscule transactions as they occur, amounting to millions over the course of a year.
I don't think anyone seriously expects a miner to keep track of this.
So my plan is to cash out my pool wallet to a proper Ethereum wallet on a quarterly basis, so that I only need to calculate what I need to file four times per year.
However, with this sort of coarse granularity, I'd be potentially vastly overreporting my earnings, as the USD value of Ethereum is likely to steadily rise on average; so if I were to use a snapshot value taken the day I cash out, I'd be valuing each unit at that snapshot value, rather than the more appropriate (probably lower) values over the course of the last quarter.
So, instead of using a snapshot value, I'll use the daily average taken over the last quarter. That should result in an amount pretty close to what it would be if I kept track of every single pool credit.
My question is: do you think this would satisfy the IRS?
Edit: The official note regarding "virtual currency" from the USA IRS: Notice 2014-21. I referenced this prior to making this post.
The relevant section:
Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities?
A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.
If I followed this to the letter, each time I "mine" the virtual currency (that is, receive a share credit from the pool) should be considered a discrete taxable event. What I'm trying to do is avoid having to manage calculating and recording dozens of transactions a day. I'm a software developer and can pretty easily automate it; but it still just seems super tedious.
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