RE: Valuing Steem Rewards As Taxable Income Is A Vast Overstatement Of Tax Liability - Part 2 - The Thin Order Book & Flash Crashes

[livingprosperity]

The assumption being made here is that STEEM coins and STEEM dollars are income. As far as I know, the federal government doesn't recognize digital currency as a legit form of money; therefore, the IRS cannot tax it as income. I have read that the IRS classified it as property, but not sure if that's been changed.

Comments

[finleyexp]

According to IRS guidance, digital currency is to be treated as property for income tax purposes. This means:

The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency.

It goes on to add:

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.
The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.

So there you have it:

1. Employer-Employee taxation is no different from payment in property. Form W-2
2. Independent Contractor (etc)-Client taxation is no different from payment in property. Form 1099
3. Capital Asset Gains/Losses are no different from gains/losses in property that the taxpayer reports as Capital Assets. Form 8489 Publication 544 (2016), Sales and Other Dispositions of Assets
4. Virtual Currency payments are no different from any other payment in property. Publication 17, Chapter 12 covers: Bartering, Rents from Personal Property, Found Property, Lotteries and Raffles, Sale of Personal Property

The IRS is also clear that FMV has to be determined for the property within the year it is reported as income. If it is held as investment property, then the FMV is within the year that a Capital Asset gain/loss occurs. It should be noted that the IRS does suggest using data close to the property exchange date to determine FMV.

If you're really concerned over whether your crypto actions will get you arrested, may I point your attention to FinCEN the agency most likely to arrest you. I've just finished this article which really just starts the conversation: Congressional Carnival [S1E2]: Former Libertarian Candidate and Bitcoin Trader Sentenced to 46 Months in Jail for “Conspiracy to Run an Unlicensed Money Services Business” [STEEMIT EXCLUSIVE #1].