1) If one had used bitcoin as a currency (bought pizza, bubblegum, etc.), are these new "treatments" of cryptocurrency implying one has to report each of these purchases and the tax implication there in?
2) Lets say you are a miner and mine a bitcoin a month (I know not realistic but helps simplify question). Now, lets say you buy pizza with bitcoins from your wallet every month. What is the cost basis to use? The price is pretty volatile .. so what the heck are you supposed to do?
If you run a small business which grosses $X,000 per month, you will a) find that that is not that rare and b) benefit from keeping appropriate records of your expenses, including electricity and depreciation of expensive equipment, such that you can claim them on the tax return for your business each year.
You might choose to swap assets of the business directly for pizza but this is, in general, not a good decision relative to swapping them for money and money for pizza.
Your cost basis in intellectual property is typically the marginal cost to produce it. You can run the question of how exactly to bookkeep it past your accountant, but the profit of a mining businesses with $8k gross revenue and $2k of expenses per month should be $6k.
If you believe your mining business to have insurmountable challenges in bookkeeping at the scale you’re operating it at then maaaaaybe you should hire professional help or exit the business.
Apart from patio11's good advice I would add that it may be important (depending on your tax laws) to record the value of the asset (i.e. BTC or whatever) when you received it and the value when you sold it. The difference may be capital gains/losses and might be taxed differently. You also need to understand if the accounting is LIFO (the last BTC you received are sold first), FIFO (the first BTC you received are sold first) or cost averaged. Some countries require that you declare which system you are using before you do any transactions, so some caution is warranted. I don't know how the tax system works in your country so this is not advice. See paragraph 1 :-)
P.S. I've never bought nor sold crypto currencies, but my small consulting business is primarily overseas work, so I have to do a lot of FOREX.
Wish there was a dummies book on this. I do have an accountant btw but want to learn myself.
Taxpayers only need to pay the MINIMUM amount of tax required by law, not the maximum. If you are audited then we will tell you why you owe additional tax. No, you will not go to jail for paying less tax but upon audit you will be required to pay the deficiency or provide additional explanations/documents etc. Then you can introduce any counter arguments like you didn't know such a law exists, the tax code is ambiguous etc. Making these types of claims will help to provide case law to clarify it for others as well as for auditors.
I agree that the taxation of crypto related transaction is quite ambiguous when you start getting into the theoretical nature of how the transaction is conducted.