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RE: US Tax Considerations – IRS Missed Billions in Backup Withholding and Why Steemit Authors and Curators Should Be Concerned
Can somebody explain to me how can Steemit<>User relationship be considered as independent contractor, when there is no contract at all to be signed. There is no business contract, only a TOS which is just the terms to use the site.
We are more likely customers/ users here than contractors, but this is just my opinion, I am not a lawyer.
@profitgenerator thanks for reading and commenting. I appreciated it.
The example I used above only highlighted the independent contractor <> business relationship. There is another piece which I alluded to but did not cover in detail, because I thought it would be overkill to get my point across. It's the relationship of banks and payments processors to report different types of monetary transfers:
Credit card companies and payment transfer networks have an obligation to report all activity over a certain threshhold of value to the IRS via form 1099-K. It is entirely possible this would be determination by the IRS of the Steemit Corporation's relationship to the individual, which creates a whole host of other concerns for Steemit Corporation I will not delve into at this time (simply for brevity sake).
If you remember, about one year ago, Coinbase pissed everyone off because they essentially included all transfers into Coinbase, regardless of their origin point, as income which had to be reported on a 1099-K to the IRS. The whole ball of wax, income earned from services paid in Bitcoin, investment capital from another exchange was treated as taxable income (and shouldn't have been), etc. The position of the IRS would remain, you received income in the form of property which has a determinable Fair Market Value, and it must be disclosed and taxed.
Whether or not I agree with this position is immaterial. I am simply making everyone aware of the rules to prepare before tax season.
Ok but to my knowledge Steemit hasnt been classified yet as taxable or not even on the radar of the tax agents. Besides i think Coinsbase is a money transmitter because they exchange USD.
But here we only have 3 virtual currencies and no USD gateway. It would theoretically be like Shapeshift.io, only cryptocurrencies.
Again this is just my opinion, I have no clue how these laws work, but it would be logical this way to treat Steemit like Shapeshift.
@profitgenerator the IRS on March 25, 2014 with Internal Revenue Notice IR-2014-36 IRS Virtual Currency Guidance did, in fact, classify Bitcoin and all other "virtual convertible currencies" as taxable personal property.
Then in April 2014 (Internal Revenue Bulletin 2014-21) the IRS both explicitly touched on the fact that a taxpayer must include all payments received in virtual currency (measured in US dollars on the date of receipt) when reporting their total income.
Unfortunately the fact there is no direct STEEM to USD or STEEM Based Dollar to USD conversion method does not mean a determinable Fair Market Value does not exist. I reference my previous article which covers the valuation methodology at the end of this article.
The difference I see between Steemit and Shapeshift is in the case of Shapeshift, an individual has purchased one coin and is exchanging one property for another, simply transferring basis. Nothing has been earned, and no capital gain or loss is recognized.
In the case of author and curation rewards with Steemit, the individual is not purchasing the tokens, they are being awarded (in effect earning) the tokens. There is a long history of case law which supports payment in property as taxable income.
Understand, you are free to do what you choose to do, my purpose is simply to inform what the law conveys and help to understand the consequences of failing to do so and being audited.
Well I'm not in the US, i am not effected by this, I was just curious how taxes work out there. Well we shall see in the future how this issue is resolved.
Agreed. My feeling is the decision to tax it as a property must ave been made partly to prevent a competing currency from becoming legitimate. Who knows what the future holds.