In the world tax accounting, we have this idea of constructive income.
Constructive receipts are income that has not actually been received by the taxpayer, but is taxed as though it had. Income is constructively received under the following conditions:
- The amount is made ready to taxpayer
- The taxpayer’s actual receipt is not subject to substantial limitations or restrictions
According to the IRS, the rationale for constructive receipts is that if the income is available, the taxpayer should not be allowed to postpone income recognition.
So by definition, the payouts received via Steem Power/SBD may fall under what’s known as constructive receipts.
For example, if you have a savings account which accrues monthly interest AND you can withdraw funds (including accrued interest) at any time, then, the interest for the year is constructively received even if you do not withdraw the funds
So in the context of STEEM payouts, where are we?
Well when we receive STEEM/SBD, we probably don’t convert to cash, however!
- The SBD/STEEM is made readily available
- The receipt of SBD/STEEM is not subject to substantial limitations or restrictions (we can do with it as we wish)
Even if we do not withdraw the SBD or convert to cash, because there is an open market for SBD, a fair market value can be established and a potential tax liability might be present.
Now, it’s really late right now and I’m writing this because I guess I like to get really granular when I’m like this, haha. It’s highly unlikely that the IRS will ever do a deep dive into the world of airdrops, POS dividends, crypto distributions, but I thought it’d be helpful to post this just so it could be at the back of your mind, if ever the IRS did decide to pursue.
Anyway, not trying to stir paranoia! Have an awesome week and keep on Steemin!
Great post and very relevant information for the Steem Community! Are you an accountant? It would be awesome if you could keep us updated regarding cryptocurrency tax laws! Cheers & Following
Hey thanks! Means a lot. I'm in the final year of my accounting degree, so almost!
Absolutely. I've actually been meaning to pull together all I know - in the context of crypto - and have conversations with my professors to see where they see think crypto taxation is heading.
If you could specialise in that area and use your expertise to help this community I'm sure it would benefit a lot here and be much appreciated!
That's definitely an idea between a few CPA (I think CA in Australia?) friends of mine. While they're working at firms, what if we were to specialize in crypto taxation and help the community as kind of a side gig. :p
Things are a bit different in Australia, obviously, but I feel like this is universally going to be a grey "try and do the right thing" area for a while, until the tax offices around the world start clarifying their stance on crypto.
I haven't spoken to my accountant yet - I don't really own any crypto except Steem, but my understanding is that in Australia it's still considered an asset, and you don't pay any tax until you sell the asset. I'll definitely be checking that next time I see my accountant, though.
Absolutely. It definitely will be in a grey area. While international taxing authorities could technically audit folks - at least the ones who've submitted identity verification to the exchanges - it would be an enormous effort. And given any government agency, the manpower to do so likely isn't present.
Haha, you definitely should! But if you don't do too much crypto trading, I can't imagine the reportable income would be material. and correct, it's the same way in the states, but what a lot of people have misunderstood, is that selling bitcoin for another alt coin is still considered a taxable event. It's not just when you convert crypto to cash.
Keep us posted to see what your accountant says!
Ooh, that's a really interesting point. Hadn't thought of that!
Beautiful writing
But does the blochchain persist in paying taxes or just charging the transfer fee?
Not 100% sure on what you mean by "blockchain persist in paying taxes", but I want to assume you mean does the blockchain aid in paying taxes/ have a mechanism in place for calculating your tax liability. If so, the answer is no :(
Currently, accounting for crypto taxes is a fairly complicated matter and while there are services like bitcoin.tax that will import your trades from various exchanges to compute your tax liability for you, it's not perfect. These are new waters we're sailing here with crypto taxes because people have been avoiding them for the better part of a decade. I'm sure the IRS will come out with some more authoritative language on how they want cryptos to be settled, or perhaps they'll just expect everyone to adopt current code and apply it to crypto.
Either way, I can definitely see there being some lawsuits in the future which will set the precedent for crypto taxation moving forward.
many thanks for info. @orangesphere
Your welcome! Thanks for reading.
Worth it to read.. Thank you for sharing..
Absolutely! Hope it'll prove useful someday :)
Yes you can...:-) More blog to read from yours... :-):-)