I invested in a decentralized bitcoin business and earned about BTC 0.4 this year in interest from it, but there is no official business - it's purely autonomous (very hard to explain). I also "mined" another cryptocurrency and have earned various amounts of these cryptocurrencies, but have not swapped back to any government fiat (if I did, the estimate would be about $180).
When reporting this on taxes, there is no official business for either of these. How do I report this additional income? I'm trying to figure out how to report this income since there is no business behind it and there's no way to prove I made this money in an audit (in the case of bitcoin, they can see the receiving address, but that's it).
- I don't sell my bitcoin or other cryptocurrency earnings back to any government fiat. So if I earn 0.4 BTC for a year, it stays in BTC forever.
- Investing in a bitcoin business like owning a portion of mining. So I invested like 2 bitcoins and I earn some bitcoins each year. Again, I don't swap back to government fiat. Since the IRS says that bitcoin is "property", I have no idea how this works, as property is only taxed when sold, as I understand it.
- Hard to explain other cryptocurrencies, but there are ways to mine them and earn them, but I don't swap them back either. I do keep a record of the cost basis, so that if I ever sell, I can say, "I mined and received this at the value of $0.01 and sold it later at the value of $100" but if I keep these as they are, I haven't officially made any US dollars or other government fiat.