Why I Just Paid Taxes on My 2017 Steemit Earnings
I just paid taxes on my 2017 Steemit earnings. It was pretty easy, actually, added less than 30 minutes to my filing process through one of the big online filing companies. It also demolished my tax return- partially by higher taxes on my increased income, partially by the increased fees the service wanted for filing the way I thought was most legally appropriate. In fact, I actually ended up having to pay a small amount out of pocket.
Since it ended up costing me money, what motivated me to do it?
Well, first off, the actual costs were pretty small. My refund would have been pretty small to start with (I hope you'll all forgive me for not giving any numbers) and the additional money I'm paying out of pocket for filing wasn't very much. So the downsides weren't that huge. Those aren't actually reasons TO file, though, just reasons why it wasn't that bad. So why did I do it?
The biggest one: I'm not anonymous. It's really, really easy to figure out my identity on Steemit. (Though, for politeness' sake, I do ask that you use Steemit, Steemit.chat, or Discord to contact me about Steemit related stuff and not go adding me on Facebook or something.) This was a conscious decision when joining Steemit. I came in with the intent to repost material for my old blog and from the student newspaper I used to work for, and doing so anonymously would have either defeated the purpose or earned me accusations of plagiarism. I no longer repost content- partially because I reposted most of what I really wanted to, and partially because I decided that I preferred posting largely new content.
I also intend to make a living as a writer. In fact, I already am through Steemit, but I intend to get published by traditional publishers- and, in fact, have made significant strides towards that goal in the last year. (I'm not averse to self publishing, it works great for some people, it's just not what I want personally.) As such, there are advantages to not being anonymous. It allows me to potentially build and maintain an audience, for instance. Quite a few authors have helped their readerships by maintaining blogs.
Because I'm not anonymous, and because I want to work in a relatively high visibility field, it would be pretty silly to potentially open myself up to trouble from the IRS. Writers and other self employed people are definitely a lot more likely to be audited than your average 9-5 salary worker or your average tipped restaurant employee. Covering my own ass is a pretty good reason in my book.
I have some less immediately practical reasons as well. Though this isn't an overly popular stance in the libertarian and anarchist heavy cryptocurrency community, I actually believe in a fairly non-libertarian future for cryptocurrency. That is to say, it's not the future I necessarily think cryptocurrency should have, just that it's the future cryptocurrency will have. This is due to a couple of things.
First off, cryptocurrency security. Despite a lot of claims about the privacy and security inherent to blockchain technologies, in practice it tends not to be overly secure, mostly due to slipshod and hasty security decisions and the primary point of vulnerability for cryptocurrency- exchanges. In fact, as much as 14% of all the major coin cryptocurrency on the planet might be in the hands of hackers.
The other reason? Legibility. Legibility in this context refers to the ability of a government to know what is going on in their domain. Legibility is even more important to governments than the ability to apply force- after all, you need to know where you're going to be applying force. Governments can, and will, crack down on cryptocurrencies, starting with the least legible. (And they're going to start with exchanges- the same spot hackers start.) Steemit is likely quite safe- since it, and the financial transactions on it, are entirely legible and public, the government's unlikely to have a significant problem with it. I'm not going to give any specific crypto investment advice, other than to say that if you're looking for a particularly long term investment, it might be smart to eye cryptocurrencies that are both legible enough for government taste and have practical real world applications. This was, in great part, what drove the rise of Ripple. That being said, the legibility and real world applications are hardly enough to predict the long term value of a cryptocurrency, but they are marks in favor of its stability.
It should be noted that legibility, like most other tools of power, isn't inherently good or bad. One of the earliest expressions of government enforced legibility was the regulation of standards of measurement. When everyone has a different measurement for a bushel of grain, it's going to be hard to set up a consistent exchange rate. If you don't all have the same measurements of distance, it's going to be tough to build a road. If you don't have a consistent system for measuring time, it's hard to schedule precise meetings.
It does tend to get a bit more complicated, though. Censuses can be inoffensive enough, and provide valuable data to governments that let them run better elections, distribute resources more equitably, and generally make society a better place to live. Census data has, however, been used historically in ethnic purges and other nastiness. Legible societies are more efficient and functional- but they're also more controllable. Too little and society breaks down, too much and it poses a serious risk to the populace.
For better or worse, we live in by far the most legible period in human history. Despite the early promise of the internet, above all else it has resulted in making our information much, much easier to gather. This leaves you with a choice of adapting to being legible and making your peace without privacy or going to increasingly difficult, time consuming, and expensive methods of maintaining said privacy- or, alternatively, withdrawing from society entirely and living in the woods.
If you're interested in the history of government attempts to increase legibility in society, as well as why their attempts to build utopian social and infrastructiural projects usually fail, you should check out James C. Scott's excellent book Seeing Like a State.
What you took as bases for tax calculation? How much you cashed out, or how much your account has grown up? Say your Steemit account has grow through 2017 up to 5000 say USD but you cashed out 2500 USD. Did you pay taxes on 5k or 2.5k?
Just on how much I cashed out.
OK cool, this simplifies things a lot ;-)
Thanks for the sharing of your experience with paying taxes from crypto earnings. I know you are living in a a different country, but since I am going to do my taxes soon too, I am curious: are earnings from STEEMIT (without further trading, but just selling) considered earnings from Mining in America? E.g. in Austria this does make a difference (Trading/Mining), but STEEMIT is not declared specifically.
I just paid taxes on the earnings in steemit I cashed out to USD.
if you have any informations about the austrian situation, let me know! I know that for mining you don't have to pay, but as steemit is blogging and thus u do an activity (writing) to earn your money, this could well end up being taxed - just as writing as a freelancer for a newspaper is.
In Österreich ist keine Umsatzsteuer für Mining abzuführen, Einkommenssteuer jedoch schon. Wie genau das bei STEEMIT läuft weiß ich leider nicht. Ist glaub ich auch zu klein, um schon eine eigene Regelung zu haben. Mal sehen, vielleicht stolpere ich über etwas Informatives. Dann melde ich mich. ;)
this is really such an informative read - both on the taxes bit, finance bit, and making it on steemit and as a writer bit. im bookmarking because i think it has a lot of helpful things to keep in mind both longterm and short term. definitely using this as a reference and thanks for being so transparent and sharing your personal firsthand experiences. i have yet to file my taxes and because of steemit and other crypto things i know its going to get a helluva lot more complicated so i might just go with an accountant filer ive used before to set the pace.
anyway thanks for sharing such a detailed and informative account!
Of course, glad you found it interesting!
I'm grateful for this post. You aren't the only one. I'll be paying on earnings as well. Thankfully, my husband can do my accounting.
The crypto-anarchists do not realize that government defining cryptocurrency as taxable item essentially legitimizes value of these virtual baubles. It is like that story about the farmer and the jade, for which the farmer had both his legs lopped off by the emperor who thought jade was just some rock. Only when the finance minister convinced the emperor of the value of jade (and thus tax income potential) did jade become a precious item. The best scenario for cryptocurrency would be, like Arizona, when central authorities allow for payment of taxes with cryptocurrency. Crypto-baubles are medium of exchange without any end use value. Value is only derived at the point of conversion into something of real value, i.e. fiat currency to pay taxes.
Exactly- and there also are very, very few places that accept payment in cryptocurrencies right now.
Governments are just collections of people. Yes, the culture right now hold these governments in very high regard for "knowing what's right" and put a lot of value in their opinions, as they tend to have a lot of force at their disposal, so "get with the winning team", right? But with better local and global communication via the internet, people understand that the functions that these organizations provide are quite limited compared to what can be achieved via transparent, trustless, peer to peer input.
I would never expect the people who would stand to lose power and money to be the first to attest that cryptocurrencies already demonstrate more value than fiat, but between underlying principles of crypto and the overwhelming imbalance of the victims to crony capitalist/government greed/waste in the mainstream to the people that benefit from maintaining the status quo, I can't see how governments that have devalued currencies are going to be able to keep folks on board.
I think the blockchain technology that is making crypto possible is the beginning of the shift for people essentially functioning as their own "business". A token like STEEM, for example, is making all of our "businesses" on here quite valuable to people like an advertiser. I think as the value of cryptocurrencies improves, with the shaking out of the ponzi schemes and more people (government officials or not) agree to its value, there will be great motivation for large corporations to accept this currency for their economic security, also further strengthening the value. I clearly have value in my own current holdings to gain from that scenario, but from considerations from economical, psychological, sociological studies and history, I have not seen a compelling argument for a contrary future...its just how fast or slow it occurs that is a big question mark.
If you ever feel confident you know what the future holds, be very, very suspicious of yourself.
In this specific circumstance, much of blockchain's underlying theory is based in fundamentally very Western cultural ideas- it's had a very, uh, unusual receptions in other cultures. I'm not convinced, for instance, that it will ever be seen as significantly more than a speculative commodity among, say, many East Asians- they haven't exactly been widely embracing alternative uses of blockchain like Steemit.
I appreciate that sentiment, I am a skeptic so I always state my conclusions so that they may be adjusted in the face of new data, but I don't make my comments lightly. I think it's clear that I hold the libertarian views regarding economics, but it is because I grew up learning American history. My independent study of these econ systems leads me to the conclusion that a free market is best. It is very new territory to no longer need these third parties of government create currency, but what about inflation, waste and other sides of cronyism within the fiat system would you miss?
Perhaps I have too focused an eye on the US right now, but I have a hard time to believe that the global population has not been a victim to some government or banking system abuse that would keep people from agreeing that humans are subject to greed and the best way to combat it, with this technology at our disposal, would be to remove the extra step. The trustlessness of these interactions is valuable to every person involved.
I am not anarchical by any means, but when a government continues to take value from it's people's work and restrict their liberties for the sake of their own personal gains, I refuse to ignore it. People will vote with their feet. If they love the way there government has treated them, then they can keep working to build in that system. I continue to earn fiat with my career, not because I'm a hypocrite, but because I know from hearing calls for communism among my generation, that there is a big learning hurdle ahead.
These discussions we are having now are vitally important to all of us understanding more fully. I really appreciate your time to respond and read, I am certainly growing from it.
Is this the constant libertarian refrain regarding "gubermit is unnecessary" drivel? It always astounds me how the libertarians place such zealous trust in mere merchants and mercantile processes to organize a functioning, stable society. Merchants' only goal is acquiring and hoarding more money, and society governed by such muck in "voluntarism" tend to devolve into chaos commonly seen in failed states (Somalia).
If your benchmark for a well-governed society is STEEM blogosphere, then I truly hope the nation-states and the banking cartel regulate cryptocurrency in order that such degenerative future does not actualize. STEEM blogosphere is ruled by so-called "whales" who engage in infantile flag wars for the most trivial reasons; it is a place where any two-bit bum can set-up a fiefdom; it is a platform that multiplies the vapidity of the modern Western "pop" culture by directly monetizing drivel; and it is a platform for anti-establishment "revolutionaries," who nonetheless giddily accept payment in virtual baubles pegged to the "worthless" fiat. STEEM platform is not some utopian ideal; it is accentuation of our current reality writ onto blockchain.
The libertarian drivel about "intrinsic" value of money is pure nonsense. Money derives value from socio-cultural convention, legitimized and propagated by the power of the state/king. Without central authority defining weights, measures, and coinage, money does not exist. The Lydian king's acceptance of worthless yellow metal, shaped into a disc, stamped with his imprimateur as tax remittance gave gold its value. Somehow, this basic relationship gets ignored by the libertarians. Government taxation creates value of money, since whatever medium (gold, silver, copper, bronze, horse, cattle, fiat, sea shells, pieces of wood) the state accepts as tax remittance is imbued with end-use utility. For all the hype regarding "peer to peer" drivel, why would any sane man accept virtual baubles without any end-use value as payment for services and goods? Cryptocurrencies have no value, if it cannot be converted into fiat for tax remittance.
And it truly does astound me that with government track records, others place zealous trust in regulation determined by a small group of citizens, versus all of the citizens(or at least those buy stuff...so I guess again, all of the citizens haha). Don't get me wrong, I am not arguing that this was a flaw in the past, it was absolutely necessary. But the ever expanding global connectivity no doubt improves local connectivity as well.
I have a hard time developing a response to your second paragraph...I don't intend to comment on how other people see fit to interact with the platform other than with my voting. What is valuable to one person is so subjective, but value is incapable of being "right or wrong", it is only an agreed upon value.
I understand that in the past, we looked to leaders with such high regard, and in some cases, very warranted. People used to believe Kings were chosen by a god, and in democratic states, people could choose. But there has never been a time where a ruler demonstrated the best outcomes for every citizen, in every person's individual opinion. I don't argue that as the goal, but I do argue that it will continue to happen. It costs some people value to their time, some people their freedom, some people their life...
The material that money is made up from never matters. That's why there's no difference in value between the USD backed by gold and the USD backed by nothing at all. The community continued to agree that it had value so it still does.
I agree with you! maybe if more people diligently paid their cryptocurrency taxes we could see governments take actions to legitimize cryptos instead of ban them or restrict them because they see them as a threat to taxing the income of people!
That would be ideal, and it was definitely on my mind when I paid taxes.
Thank you. I am definitely going to check out that book, as I have an SF writer's interest in comparative systems of government and culture. Exploring the possibilities and all that.
It's a super interesting book, well worth the read.
It is reassuring and admirable to see someone with as much rep as you have on Steemit advocating personal responsibility. Way to lead by example! Thank you as always for your well thought-out posts.
It is indeed a good safety measure to take. Did you pay taxes over the value you accumulated in steemit, or did you file only the money you transferred to 'real' currency for your daily life?
Just the real currency amount.
Better to be safe than sorry! Might as well save yourself a potential headache.
I am pretty new to crypto world and I still haven't tried to send any earnings to the bank account. Based on how things in my country aren't functioning very well, I will have to check what kind of taxes apply to earning from steemit and base my decision on that. There are some more experienced blogers from Croatia here on steemit so I believe they will be able to offer valuable advice.
I am not against paying taxes if they are reasonable and proportional to what the country offers and how it spends money collected from taxes. Unfortunately taxes for most of the things here aren't reasonable, and what country does for the people isn't proportional to the amount of money taken from the people. One of the clear indicators is the amount of people leaving the country in the past few years (over 200 000, mostly young people, which is huge number considering that total population of Croatia is less than a 4 million people and the situation isn't improving.
One of the reasons why I and many other people have stayed here is to improve the situation. In order to improve the financial picture of the situation it is necessary to be able to cover your living costs. If that means avoiding the taxes from steemit in order to open up business which will employ people, give them an opportunity to create their future here I am willing to avoid taxes from my steemit earnings. I don't even see it as an immoral act as most of the money I earn will be spent in Croatia and our basic tax here is already 25% so the country will get its cut.
I like your post brother
Very nic post.
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Very nice post @mountainwashere
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Bagaimana saya belajar dari anda?terkadang harus bertanya terus dan terus..terimakasih jika anda mau berbagi untuk saya.