RE: The 4% withdraw rule and why you may never need to completely cash out of Steemit

[dber]

It's possible of course that they change this rule in the future - even now it's just an advisory notice,I think. But without any other stuff to guide me I consider that IRS policy - and it has some serious implications for STEEM the moment it can be claimed in your account.

Comments

[dana-edwards]

That notice is from 2014 and speaks nothing of Steemit in particular. Does it even apply to Steemit? If it applies to Steemit why wouldn't it apply to World of Warcraft, Diablo 2, and every online activity?

As far as I know, that seems to apply to miners in particular. Miners are creating money or something intended to be money. Steemit bloggers are earning virtual tokens which can be traded for some unknown amount of money which fluctuates wildly. You can't use Steem Dollars to buy coffee or for anything really so it's not like Bitcoin but seems more like Linden Dollars or WoW gold which is used on this platform but isn't like real money.

Of course I could be wrong, but unless the IRS clarifies and states that this notice applies to all digital currencies, and all platforms, including games, then I don't see that it clearly applies to Steem even if some people might want it to.

[dana-edwards]

Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.

So it looks like you would have to declare using a 1099 for Steemit income and that much is clear. What isn't clear is the theory that you have to declare before it touches your bank account and becomes real money. There is no evidence or at least not consistent evidence that the IRS enforces that or that it is the intended policy. If it is then the implications would go far beyond Bitcoin mining and would touch all activities which involve any kind of game item, token, etc, and so if someone gives you a sword worth money in World of Warcraft, do you now have to immediately declare it on your income tax even if you never sell the sword for real money?

It sounds a bit ridiculous if that is the case because how would people play the game of World of Warcraft if their activities in the game are all taxable? It would make all online gaming taxed by the IRS to the point where every player would owe some sort of tax.

To me it's a radical view, and theoretical because the IRS hasn't released any additional notice since 2014. This leaves everyone in the dark or in the confused position where no one can say for sure what the IRS intends to do except for the IRS itself and what happens if you believe every virtual activity is taxed so you pay too much in tax? Do you get the money back if you over paid?