RE: The 4% withdraw rule and why you may never need to completely cash out of Steemit
Right but Steemit isn't minting new cryptocurrency. Bitcoin is minting cryptocurrency. Steem Dollars might be created but those Steem Dollars aren't being minted by the player/participant/bloggers. The bloggers earn the Steem Dollars so it's earned income not minted or mined.
Tell me where I'm wrong? If you blogged on your own website and someone donated Bitcoin to you, how would you pay tax on this? Suppose the Bitcoin was received at $2500 but by the time you got it to your bank account it was $500? Are you saying you owe taxes on imaginary money? Is that the intended policy of the IRS?
Couldn't this be exploited? Someone could deliberately send you a token which seems to be worth $1 million dollars and then minutes a day later it's worth $0 and you owe taxes anyway? What if it's a baseball card which is worth a lot when you received it, but worthless a few days later?
Again, based on a plain reading of the notics i sent you, i would understand the bitcoin to be compensation for my nlogging and the IRS to tax that bitcoin at the current value the moment i receive it.
Now, if it loses value after i get it perhaps i can, bizarrely, also deduct those loses as it is simultaneously being treated as currency and investment property.
But really, who knows?! no one. Im just saying at least have a back up plan in case the IRS DECIDEDS TO GET AS GREEDY AS IT APPEARS THEY MAY TRY TO GET
So if you receive it, you can claim capital loss? But only to some arbitrary limit. So what happens if your losses far surpass what you owe, but you cannot claim that?
The IRS hasn't shown that they are going to pick on cryptocurrency to that extent but of course they could. The IRS also could decide to investigate all who are of a certain political view such as libertarians and anarchists. This however sort of defeats the purpose and makes the IRS into a sort of activist outlet, as the purpose is to collect the maximum amount of taxes rather than to bankrupt the tax payers correct?
So by simply accepting the income taxes from 1099 they can get tax payments for 30 years or however long indefinitely. Why would they reject that in favor of bankrupting Steemit millionaires? I don't see how it would get them more money and in fact probably will just encourage people to try to avoid paying any taxes.
It is - to put it frankly -a shitshow. Nothing is certain and that's the concern. Yes, there would be a profit motive on the IRSs part i think to maintain value in these currencies and therefore not take on the most onorous interpretations of income here.
But at the same time the IRS has been for a long time an agent of societal norms and taxation as a form of behavioral penalty is always a real possibility.
But how this plays out is unknowable I'm just glad to have engaged with you on the topic and am trying to encourage people to at least consider and prepare for all eventualities. just because the worst case outcome does not seem sensible does not mean it should not be prepared for.
You have a point, and if my account on Steemit becomes worth beyond a certain threshold then I too will hire a CPA. Right now I don't have an account worth $1 million but I do think it is possible by the end of the year it's possible.
Even with a CPA, some transactions I don't know how to capture or how to classify, but if I think I will be a millionaire in the future it would make sense to follow a path of least resistance in order to keep whatever I do earn on Steemit.
From what I heard even from various CPAs there is mixed opinions and strategies. Some suggesting immediate cash out into fiat as a means of risk reduction. Others seem to think if it doesn't touch a bank account it's not taxed. I'm not sure which faction is right.
The good news is as long as people engage in the process in good faoth and act consistently then the situation is unlikely to spiral into criminal waters.
Its one thing to be genuinely confused with the tax code and either over or under shoot your liability in a given year - especially on the forefront of a financial issue like this. It's another to actively scorn the notion of taxation, period, and try to hide the ball entirely.