Topic: Anybody in the US mine at home and call it a business? - page 2. (Read 1353 times)

I am not aware of any reason you need to be a business to write off your electricity expense in the US.  Quite a few sole-proprietorship "businesses" are run without formal structures.

For example, you are allowed to deduct expenses from a hobby (a hobby is also a business that looses money for 3 or more years  ) up to the income of the hobby.  This is why I recommended earlier to try to have a few dollars profit after expenses in case the IRS does call you a hobby instead of a business.

If you are a hobby and not a business, and the IRS accepts that, then you will not owe self employment tax on the BTC mined.  The determination of hobby can be made by percentage of income vs your normal paycheck...but you won't know what those subjective percentages are until after you are audited.   

If you can prove on paper that you have a profit motive and you loose money, the write-off could extend to cover your personal income (unlike the hobby) or the losses could be carried forward.

If the IRS determines you are a business, you may be subject to self employment tax on the earned BTC if you get an auditor in a good mood.  It you have a big enough mine it may be worth forming an S-Corp and paying an attorney to figure out how to limit those taxes.  Probably not worth it.  I'm considering my small after work "hobby" passive income since it involves far less time than dealing with tenants. 

Well I called my accountant. They are going to research into it more before making a recommendation for me. I’m the first person around here to even ask about something like this. Small town USA. My current business is an S-Corp so that is what this would fall under. I really wanted that electricity write off.

If it is a business there's no reason it can't be called a business. Definitely check with a competent accountant but just because it's out of the mainstream doesn't mean it is disqualified.

I started a business with mining in the name, to the points above I could have left "mining" out but I reference data mining / processing when speaking to it.  Yes some banks and insurance companies seem to balk as soon as you use the word "bitcoin"...

Being a newbie it might not let me post this link, but Turbotax has pulled together some of the IRS guidelines around bitcoin and crypto (just lookup "turbotax bitcoin guidelines" in a search engine ) if it doesn't show the link:

https://turbotax.intuit.com/tax-tips/tax-payments/tax-tips-for-bitcoin-and-virtual-currency/L1ZOgU00q

Other than that, I think buying mining equipment for a brand new business could be written off in the first year instead of depreciating, up to you, but I'd be a little careful about claiming power ... i'm colocating at a data center instead of running these at home , so I write off my monthly data center bills...  but consult your CPA or tax advisor about that, as for income an LLC is the way to go but pass through income that's "passive" could benifit from an S-corp to save self employment taxes ...

just a few thoughts

See K1 Tax info and just hire a crypto cpa.

 

The IRS...

No one can give you an answer, not even a highly experienced tax attoruney, on how the IRS will rule.

Your best bet is to try to make a tiny bit (or a lot) more than you spend so that you might qualify as a hobby.  Just don't loose money.  After all, there are horse riding and Nascar teams that the IRS has determined are hobbies.  (But not a teenagers lawn mowing business)

If you have a profit motive, they will likely want you to be a business as long as you aren't loosing on paper.  If you loose money on paper they will likely want you to be a hobby.  You don't want to loose money and be called a hobby.

If you are a business the next thing you'll need to decide is if you are making passive income or if you owe self employment tax.

Each auditor can come up with a different determination on any combination of those possibilities.  Not loosing money will at least keep you from crying when they make it a hobby.

Being a landlord, managing or not, is an example of passive income.  Rental units take quite a bit of work between tenants.  A fourplex could easily take more effort to manage than 1000 amps of miners.  That would be my argument.  At least that way if the miners break or depreciate faster than they earn it could potentially shelter your other income.

In closing, after your audit if you ask "So, I did the same thing for the 4 years following this audit...do I need to refile my returns?"  They will say something like "No, another auditor might come to a different determination.".  Pretty confident, aren't they?

Nothing ever happened.   

I was thinking along the same lines. It shouldn't matter what you are currently in business for. If you want to add a new division to your current business, I can't see that it would matter to the IRS. I mean if Microsoft all of sudden started selling men's fashions and fishing tackle, the IRS wouldn't care. All they care about is your income, it proper reporting, and it's taxation.

Ah now see. This is what I’m talking about right here ^^. Now I need to go check. I can’t remeber how I set it up.

Here we go.

The transaction of any or all lawful businesses for which corporations may be incorporated under the Illinois Business Corporation Act.

I’ll be taking that to my accountant.

I hope that when you filed for articles of incorporation within your state, you claimed purpose was "Any and all lawful business" otherwise you would be severely limiting your options.  As long as you pay your taxes, it doesn't matter what business you own!  In America, you can use your business to do whatever you want!  Now if you seek to gain some kind of tax incentives for specific industries, that's different.  But there is no distinction between a company that provides a service or a company that provides goods, except for tax implications.  Which, if you're paying your taxes there is no problem. 

So why not use your company's money to buy a few S9's, list them as equipment under Long Term Assets, and use double declining balance amortization over a year (until next gen miners come out), sell them for cheap and post capital losses to pass through on future mining revenues?  Verizon is a wireless company, but that does not mean that they can't make money from investing in the stock market.  Because they do, all the time actually, and they pay taxes on all their capital appreciation and income revenues from that.

It can be called a business easily.  Keep everything separate....

Ya I want it legit. I didn’t know if it could even be considered a business. I’ll call my accountant on Monday. I suppose it would be easier if I was a reseller of mining equipment.

You might be lucky for a few years but if you ever get audited then it sounds like it could be a big mess.  I think having a business on top of another occupation is one of the red flags that can trigger an IRS audit.  Of course, if you get an LLC that would probably help but that can be a pain to get an maintain.

There was an article I recently read about the top reasons that trigger an audit blurring the lines on business expenses was in the top reasons. 

Ah, finally found the original article...  

https://www.nerdwallet.com/blog/taxes/7-reasons-irs-audit/

How do you claim mining equipment as a business purchase doing personal training? I own a machine shop. I do maintenance machining and welding. There’s no way I could get away with buying miners for my machining business.

Yes, I run a small personal training and nutrition consultancy.  And I also mine, report revenues paid, depreciate the machine's value, amortize the equipment loans, post capital losses when BTC declines, etc.  Its really exciting to have this kind of supplemental income!

Definitely fit it with your other business.. call the miners 'electric fidget spinners' if you have to or space heaters..   see which of your clients don't pay attention to their quotes     all for fun of course!

I also am already self employed. My current business though wouldn’t fit with mining. I’m mostly after writing of the electricity cost. If I’m going to be paying income taxes on this. I want to write off what I can legally. I’ll talk to my accountant. I just wanted to see if anyone else was doing it and maybe had encountered anything to be aware of that I should find out about.

Yes. I would call it something innocuous without the mining in the title. Joe's Holdings or Joe's Solutions or something similar. Mine is an LLC. I was already self-employed, so I didn't look at the occupation aspect. As for the rest, I would talk with a CPA.

So you created a Sole Proprietorship and have a business name then?

On my taxes I treat it as a business.

I take off the sq. ft. of the room i use for mining, all the equipment I purchase, and part of my electrical bill.   If you are taking out loans or going to have some other large liability, you'll want to create an LLC and keep your personal finances separate from your business finances (and keep good records).  This will protect your personal assets to an extent.    In my case, I have no liabilities, so the LLC doesn't help me much.  I treat it as a sole prop. 

My normal disclaimer on this is that the above is for informational purposes only.   You should consult a tax consultant or attorney if you want advice.

If you do, don't tell the bank you are running a bitcoin mining business.  Call it a data center.  I've seen folks reporting back from 10 different banks all of denied a business account based on the business being a bitcoin mine.
Everything else is true. Write offs for internet usage, any upgrades for the power and infrastructure.