It's Tax Time!

kbarrett (48)in #tax • 6 years ago

So I just came across a post from @Crypto-Investor where he's spending a bit of time highlighting some tax implications for cryptos, including Steemit.

In it, he notes:

How is Steem earnings taxed?

Believe it or not, Steem earnings are taxable too in the US. When you earn Steem or SBD, this is business revenue. Personal business revenue is reported on a Schedule C form to file with your 1040. You would calculate this revenue at the fair market value on the date you acquire the funds (when you click the redeem button). This would be business revenue. Since you likely do not immediately sell that Steem Power and SBD, you also create a secondary business investment transaction. The basis for the investment would be whatever you recorded as your business revenue. Then when the Steem / SBD is sold, a gain/loss would be calculated at the fair market value of those properties when they are exchanged for something else.

I thought I could use this as an opportunity to piggy back off of his post and highlight some additional details in regards to reporting your Steemit activity...

With that in mind, let's jump into this thing!

Now, I can honestly say that I have not come across a single entry by a Steemit user that has asked how to make less money... if that's you, feel free to click your rewards drop down box to Decline Payout and stop reading this right now. For everyone else that's here to actually using Steemit to make some money... listen up.

Since the IRS is buckling down on Crypto Currencies, they will undoubtedly be including Steemit in that roundup. You are, for all intents and purposes, blogging for a profit. With that being said, you'll be able to deduct quite a few toys... err, I mean, business tools that you wouldn't normally. So let's make a quick list!

Blog conferences and workshops (Steemfest anybody??)
Hotel and transportation costs if you had to travel to a blogger event
Mileage (for your 2017 taxes, you can deduct 53.5 cents for every mile you drove as part of your blogger gig…for example, driving to a nearby blogger event)
Business cards
Buying ads on other sites
Blogging related e-courses
Supplies for any projects that you may use in tutorials on your blog
Your computer
Your camera
Software, such as Photoshop
Educational platforms (if the courses you take relate to your growth as a blogger)
Any fees you may be paying when cashing out :)
Photo fees (conversely, I always change Google Image settings to free to use or share, even commercially under Usage Rights in the Advanced Settings)
Fees to prepare your taxes (such as hiring an accountant or using Turbo Tax)
Photography, such as head-shots or paid photos taken for your blog
A giveaway prize that you paid out-of-pocket for
Office furniture, if it’s used exclusively for blogging
Your home office, if it’s used exclusively for blogging
It should be noted that people that report home office expenses are more likely to be audited by the IRS

In regards to the investment transaction that he mentioned... while the tax implications are the same, it is my belief that the IRS would likely look to Foreign Currency Transactions when dealing with Steemit users. So I'm going to continue given that presumption...

As everyone knows, the value of any currency will fluctuate over time. As such, the USD to insert other currency here exchange will also fluctuate, resulting in gains and losses from property dispositions. With that said, we need to consider foreign currency exchange rules when accepting payouts from Steemit.

There are 3 important concepts to remember:

The gain or loss is only recognized when the transaction is completed.
Steem or SBD is treated as property rather than money;
Regular income is recorded at the date that you accept the rewards, but the gain or loss on the transaction is recognized on the date that you cash out.
Note- These are hard and fast rules for typical foreign currency transactions. I'm going to follow up with a friend that is a tax professional to get his opinion on what happens if we never exchange SBD for USD.

Well gang, that's all I've got for ya! Hopefully this was helpful, or at least somewhat educational.