In exchange for this work, miners receive cryptocurrency as a reward. If you earn cryptocurrencies by mining them, they are considered taxable income and can be declared on Form 1099-NEC at the fair market value of the cryptocurrency on the day you received it. Yes, cryptocurrency miners have to pay taxes on the fair market value of the coins mined when they are received, just like any other income such as wages or profits from investing in Gold in my IRA. The IRS treats mined cryptocurrencies as income. When you successfully mine cryptocurrency, a taxable event is triggered.
The fair market value of the cryptocurrency will be added to your other taxable income received throughout the year. All blockchain transactions are publicly visible. In the past, the IRS has worked with contractors such as Chainalysis to analyze blockchain transactions and identify “anonymous” wallets.