RE: US Tax Considerations – IRS Missed Billions in Backup Withholding and Why Steemit Authors and Curators Should Be Concerned
Good article! This is a really important thing for people to be considering!
This is not tax/legal advise either (and could be wrong), but I am pretty sure this is how the US gov currently looks at it:
As far as I know, the US government does not consider digital currencies like BTC and SBD/STEEM taxable income. What they consider a taxable event is when the BTC/SBD/STEEM is converted into USD or any other fiat currency.
So basically what that means is if you have earned $1,000,000 in SBD from Steemit, and it is just sitting in your Steemit wallet, you don't currently owe the US government a cent. (Good job on earning $1,000,000 though!!) The moment you cash that out in an exchange though, then you would owe taxes on whatever amount of fiat/USD you received.
Again, this is not tax/legal advise, so please confirm this for yourself by talking to a tax advisor. I am pretty sure that is how it works though. Also, it is good to know that in case STEEM/SBD is (or ever is in the future) considered taxable income, that the blockchain has already prepared all the info we need for us :)
@timcliff thanks for taking the time to read and comment, my friend. I appreciate it.
Let's assume you author a post and receive rewards in STEEM, STEEM Power and STEEM Based Dollars valued at $10 SBD of value. You then take the STEEM and SBDs and exchange them for USD at an exchange. The reality is you have two taxable events to record: you received income in the form of rewards for your post with a determinable Fair Market Value in the form of STEEM, STEEM Power (just more STEEM) and STEEM Based Dollars this is your taxable income, and when you exchange the STEEM and SBDs for USD, you could possibly have a Capital Gain or Capital Loss to record on the exchange.
US Tax Law views fair consideration given in exchange (including property with a determinable Fair Market Value) for a good or service performed as taxable income that must be reported and is subject to income tax.
In the event you purchased STEEM and/or SBDs, you hold it in your wallet and wait until the following year to sell it, then you have only one taxable event: a capital gain/loss to record at the time of the sale and if the conditions are correct, you could have an incredibly favorable Long Term Capital Gain. Mining currency is another issue altogether.
If you have any specific questions, go ahead and ping me at [email protected]. I am an Enrolled Agent licensed to practice before the IRS, and one of the areas I focus my practice on is Bitcoin and other cryptocurrencies (mining, trading, etc.). You can check out my earlier series in my blog US Tax Considerations and Blogging For Magic Internet Money. I go into some considerable detail of the ins and outs of tax law for laypeople.
I hope that clears this up.
Cool, thank you very much for the excellent info!