Crypto mining has been extremely profitable over the last few years, with Bitcoin miners making an estimated $15 billion of revenue and several mining companies going public in 2021. Miners are critical to preventing the “double-spend” problem in decentralized cryptocurrency networks such as Bitcoin. They validate and add blocks of transactions to the blockchain ledger by competing with other miners to solve complex mathematical problems and receive crypto tokens as a reward for their mining activities.
Unsurprisingly, crypto mining profits have caught the attention of the IRS, which has taken an increasingly aggressive approach over the last few years to auditing and taxing mining activities. Given this increased enforcement, tax practitioners and their clients alike have explored ways to minimize mining profits by performing mining activities through tax-advantageous vehicles such as IRAs and 401(k) accounts.
Recent Comments