RE: It's official, cryptocurrency has at least 3 million users! But tax complications threaten to rub out all legitimate use cases
My point is there might not be any practical way to avoid being audited. Also the 2014 guidance if it applies to all kinds of virtual currency, would be extremely broad and radical. It would mean gamers in WoW potentially also would owe taxes for trading items which have obtained some dollar value on some market. If it applies to all virtual currency everywhere, then the issue is bigger than Steemit, Bitcoin, Ethereum, etc.
Also you claim LIFO/FIFO are options but how do you know that will be accepted? What if they don't accept that? The main issue, well several, there aren't any built in tools to automate the process of determining what is owed. I know you promise to make a bot, but the bot currently doesn't exist and many people honestly wouldn't use it unless it's built into Steemit itself.
Yes, if the IRS decides to go after WoW players, it would be radical -- and they would win. The laws are pretty clear unfortunately. I don't see there being enough money in it for it to be worth the hassle.
EDIT: Unless the WoW players successfully argue that it isn't a convertible currency because there are no legally recognized, sanctioned and regulated conversion markets . . . .
I know that the various sales options will be accepted because the IRS said that cryptocurrency is to be treated per the standard rules for property.
The IRS could easily build a bot and then charge you back taxes, interest and penalties. Rational people will use what will prevent them from drawing the ire of the IRS.
It's not a debate about what the IRS can do if they take the radical interpretation. The debate is whether it defeats the purpose and function of the IRS to take that interpretation? They won't get more money cracking down than they would if they encouraged legitimate users to pay taxes.
Same with WoW, they can crack down on it but doing that would not seem to be worth it politically or economically. It would hurt the economy and make the IRS look evil. The question is whether the IRS is willing to work with the community or are they intent on cracking down and from the John Doe summons to Coinbase it is looking bad but we don't know for sure.