That was in 2014 though. They need to put out a new updated guidance and then ask for comments. I'll gladly send them comments if they were to show some indication that they'd even care what I have to say. I'm sure the vast majority of people would also comment, especially coming from Steemit.
The main issue is it's not feasible for anyone to be expected to track every single transaction for capital gains / loss unless it's all done in some automated fashion. When it's manual then it's the equivalent of being put through an audit where a person is asked to find every receipt of every purchase. If it's just about collecting the tax dollars then they'll probably get their money either way, but the main issue is the difficulty of calculating what that is.
The longer you've been in the space, the more you actually use cryptocurrency for legitimate purposes, the harder it is to comply. The first thing I think policy makers need to do is come up with some simple rules which anyone can follow to pay their taxes without having to worry about capital gains / losses on every little thing, or questions about whether the tax happens the instant they receive a cryptocurrency or when they turn it into money.
Because as it is right now, under the radical interpretation someone can send your grandmother a token and put her in tax trouble. She would have no reasonable way of even knowing necessarily how to cash out the token, but even if she does know, she's not automatically going to track the capital gains. The wallets would have to have this all built into them from the start. Steemit looks like bait to the IRS by offering dollar amounts (which I always thought was a stupid idea), and no privacy, so it looks like people have a lot of money but the actual amount they can cash out could be entirely different from whatever those dollar values say. An account with 1 million in imaginary value is still only value based on the assumption that Steem Dollars hold the peg, that Steem can be traded and cashed out, etc.
Here is a scenario based on something which happened to me:
Suppose you mined or bought or earned or obtained or were gifted cryptocurrencies, and these trades you made under an account were valid, but you lost possession of the account because your computer or storage media broke? Do you get to pay taxes on something you were never able to cash out or spend merely because at some point in time you had possession? A lot of people have lost private keys, or lost access to accounts, so if even they owe taxes on that then you have even more confusion.
2014 for the most part was the year of losses for people. People who did file their taxes from 2013-2014 likely saw only capital losses. Bitcoin price and most everything was beginning to go down and by 2015 it was a recession. Now people call this a bubble but again, eventually the prices will go down, and then what happens to people who bought or were given cryptocurrency at the peak of the bubble but sold at the bottom? In theory I can imagine ridiculous situations where people owe more in tax than their entire crypto stash is worth with no way to pay it. I'd like to see more bloggers and lawyers discuss these hypothetical tragic scenarios to make a case for why laws have to change and the tax code must be simplified.
Well, the notice was from 2014 - but the contact information is no doubt correct and as a public agency they might be responsive to a large influx of comments. Especially if the comments are primarily people trying to figure how best to pay them money.
The obvious choice for newly mined currency - or newly mined currency divied out to steemit users for instance, is to decide the tax basis at the moment the currency is converted into actual dollars. Or potentially at rhe moment is is converted into bitcoin - which Japan for instance treats as currency.
I think what I'll do eventually is write a stock letter and post it to try to get some cpmmunity edits going on it. Once we have a letter we all roughly agree on - or at least that many of the bigger users agree on, we can make another post trying to have everyone send it out.
I might write a similar letter and do a similar process asking for steemit management to remove the fiat currency references. I agree it paints a not entirely accurate picture and supports the notion that users with large steem banks are just sitting on millions of dollars they could get at like an atm or somethibg - as opposed to through a minimum of two currency exchanges on constantly fluctuating markets, themselves still in infancy.
I support this and will sign a petition if you set it up. We should not deliberately design the UI to provoke the IRS into thinking Steem is more than it is. I already mentioned to developers that the main flaw in Steem is lack of privacy of the wallet but I was more concerned about hackers at the time.
Ill try to have a draft by next week or sooner
There are rules about losses. The question, of course, is if they claim that you DO still have access despite your denials . . . .
Can you describe a scenario where selling their entire crypto stash results in a greater tax burden than the sale proceeds. I don't believe that it is possible.
You can definitely be screwed by not selling -- but that is true of any property.
Yes many many scenarios. Someone can send you something worth something on an index which you cannot sell at that liquidity for that price. Someone can send you something which you can sell but don't, but I don't see why a person should be punished for not selling the instant they get it either. Of course that is a moral not legal argument I'm making and whatever the law says is what it says.
In the case of Bitshares, I believe when they raised money via Angelshares they almost got screwed by a technicality like that. Then the market for Bitcoin and everything crashed and they couldn't get out as much as they were sent at the time to pay their tax. This happens a lot actually because the price you receive payment isn't necessary what you end up selling it for if the price crashes before you can sell it.
Probably most of these projects if it really is a bubble, are in position to be screwed by the IRS. How will they deal with it if they received $150 million dollars in ETH today, but a few months from now that's $5 million and they owe taxes? My whole argument is if the IRS cracks down on stuff like that it actually results in them getting less money than they could get if people just paid taxes.
Projects and people who are bankrupt cannot pay as much over the long term.
If I were to get $150M today, I would immediately start selling what I expected to owe for taxes. Then I could hold the rest after the crash.
If you don't have such foresight, you WILL be forced to sell it all. Also, while (estimated) taxes are due on a quarterly basis, the reality is that you'll have until April 15th of the following year (i.e. longer than the 3 month power down) to power down and sell. (The 2-year power down could have caused a nightmare scenario though)