Hi There!
I buy a little Bitcoin most Sundays. Fifty dollars, sometimes more.
The first time someone mentioned crypto taxes to me, my stomach dropped. Fifty dollars a week felt like a coffee habit, not something the IRS would ever care about. I told myself the same thing I now hear from some of my readers:
"It's such a small amount. Surely nobody is tracking that."
I was wrong, and the confusion I felt is the same confusion I hear from almost every reader who writes to me about crypto and taxes.
At the Bitcoin 2026 Conference, I sat down with Calix Liu, founder and CEO of FinTax, and Jeffrey Li, the company's Head of North America. FinTax builds accounting software for large Bitcoin mining companies and digital asset businesses. Most of what they handle day to day is bigger and more complicated than a Sunday Bitcoin purchase. The questions underneath their work, however, apply just as much to readers with a small wallets.
Owning Crypto without cashing out does not mean the IRS is unaware.
Can you prove what happened with your money? Do you know when a taxable moment actually occurred? Those two questions carry the rest of this issue.
The IRS treats digital assets as property, the same broad category it uses for stock or a rental house. A taxable event does not require converting anything into dollars. Selling, trading, or otherwise giving up one asset for another can matter, even when the entire transaction stayed inside the crypto world.
Three myths about crypto taxes that could cost you money.
Myth 1: "If I never cash out to dollars, the IRS doesn’t know."
This is the myth I believed. It felt logical. No dollars touched my bank account, so nothing taxable happened, or so I assumed.
Crypto is property. A taxable event does not require touching a bank account.
Myth 2: "Crypto is anonymous, so nobody can trace it."
Blockchains feel private because no bank teller is asking questions. Many crypto transactions sit on public ledgers, visible permanently to anyone who knows where to look.
Tax authorities are also getting better at connecting those records to real people. During our conversation, Calix Liu explained a framework called CARF, the Crypto Asset Reporting Framework, built by the OECD (Organization for Economic Co-operation and Development).
What CARF actually does:
Calix Liu compared CARF to an international version of a reporting system many countries already use for traditional bank accounts. Under CARF, tax authorities in different countries collect information about individuals buying and selling crypto, then share that information with each other. This means that investors are becoming more visible to tax authorities than they used to be, and this is now a global standard rather than one country's rule.
He added one more detail worth sitting with if you have ever assumed crypto taxes were optional for smaller holders. The requirement applies to everyone, not just large accounts or businesses, and FinTax now positions itself as a leading provider of CARF compliance solutions for exchanges and platforms navigating the new standard.
This does not mean every crypto holder should panic. It means the idea of crypto as a hidden corner of the financial system is fading.
Myth 3: "I only need to worry if I'm trading large amounts."
This myth costs people the most because it sounds reasonable. A small investor assumes taxes are a problem for people with huge amounts of money in the game.
Every crypto to crypto trade can create a gain or a loss worth reporting, regardless of size. Paying for something with crypto can also count as a taxable event. A ten dollar macchiato bought with Bitcoin can create the same kind of record as a ten thousand dollar trade. Size changes how much you might owe. It does not change whether the rule applies to you.
The simplest way to think about it:
Treat your crypto activity like a garage sale receipt.
Nobody asks for a receipt when you sell your neighbour an old lamp for five dollars. If you were ever audited, or a buyer disputed the sale, you would want to know what you sold, what you were paid, and when the sale happened.
Crypto works the same way. Nobody interrupts a transaction mid-transfer to ask for documentation. The problem shows up later, when you need to reconstruct a year of activity from memory, a few screenshots, and an exchange account you forgot you ever opened.
The investors who feel calm about crypto taxes are rarely the ones with the least activity. They are the ones with the best records.
Beyond the Myths.
What small-scale miners can learn from the big operations:
FinTax mostly works with large mining companies, including some of the biggest names in the industry. Individual and hobby miners came up in our conversation too, and the lessons apply no matter how small your setup is.
Losses aren't only a corporate problem.
Calix Liu made a point that applies to any miner watching Bitcoin's price fall. A price drop creates a loss whether you run a company or a single machine at home. The real question is the same either way. Can that loss be claimed on your taxes where you live? A hobbyist faces this question on a small scale. A mining company faces the same question on a large one.
The interview also touched on a line most individual miners cross without ever noticing.
Hobby or business, and why it matters.
Calix Liu explained that treating mining as a small hobby leaves little room for tax planning. Once mining grows into something closer to a real business, new options open up. At that point, a miner can choose where to claim profits, set up a proper business structure, and look into local tax breaks. In simple terms, the more serious your mining becomes, the more it pays to treat it like a business.
Electricity came up as the one thing that is important no matter how big or small your setup is.
"If you can get cheap electricity, then you are ahead of others." ~ Calix Liu, Bitcoin 2026
The golden rule is still the golden rule
Calix Liu explained that efficient, low-cost power remains the single biggest factor separating profitable mining operations from unprofitable ones. Electricity is usually the biggest cost in mining Bitcoin, so cheaper power means more profit, whether you run one machine or a warehouse full of them.
Calix also mentioned a trend among bigger operations worth knowing about. Companies with cheap electricity are starting to use part of their facilities to run AI computing too, right alongside Bitcoin mining. Looking back, it's clear that the real advantage was never the mining equipment. It was the cheap electricity behind it all along.
Tax breaks for miners using cheaper or greener power are not easy to find in one place.
Incentives exist, but you have to go find them.
Calix Liu explained that there is no single federal tax credit for using green energy. Most incentives come from individual states rather than the federal government. A state looks at how much you're investing and how much good it brings to the local economy, then decides what to offer. Some of these programs are easy to find online. Others require a phone call to the right office. If you assume there's nothing out there for someone your size, it may just mean you haven't looked in the right place yet.
Quick Lesson from all this
Four Habits worth starting this week.
You do not need enterprise software built for a mining company to protect yourself. You need four habits.
Keep a record every time you buy, sell, trade, or spend crypto, noting the date and the dollar value at the time.
Save exchange statements before an exchange shuts down or changes ownership.
Write down the reason behind every wallet transfer. A move to your own hardware wallet differs from a sale only if you can prove which one occurred.
Talk to a tax professional comfortable with digital assets before your activity gets complicated, not after it already has.
None of this is glamorous. It is also the difference between a calm tax season and a scavenger hunt with penalties attached.
Resource Spotlight
If you run a mining operation or crypto business
FinTax: accounting software built for digital asset businesses
The planning gets considerably more layered at business scale, from equipment depreciation to state-level incentive structuring, and it deserves its own conversation with a professional.
FinTax works with businesses at that scale, building software that turns blockchain transactions into records that satisfy standard accounting and audit requirements. The company has also started incorporating AI tools to help clients manage their books directly.
If that describes your situation, reach out to a professional who specializes in it at
For everyone else, the four habits above will take you far.
If you do noting else this week
Start a simple log of every crypto buy, sell, trade, or spend.
Just the date, the asset, and its dollar value at the time. It’s a habit worth starting.
Food for thought
Crypto does not have to be frightening. Messy records are the frightening part.
You are not behind. You are at the point where a small system needs to start, before a year of activity piles up behind you.
We are going to keep making this make sense, one step at a time.
~ Rhoda
Know someone still guessing about crypto taxes? Share this with them.
This newsletter is for educational purposes only and does not constitute tax, legal, or financial advice. Crypto tax rules vary by jurisdiction and change frequently. Speak with a qualified tax professional about your specific situation before making decisions.
Disclaimer: This newsletter is strictly educational. The information this report provides does not constitute investment, financial, trading, or any other advice. You should not treat any of the report’s content as such. Please be careful and do your research.
