RE: The IRS is data mining social media, Steemit is on the radar
It's not really clear. I guess if we do it wrong the IRS will correct us later. What I do know for sure is once it reaches our bank accounts it is for certain. As far as how to calculate the income that is really hard and then you don't know if it's a security or money either. Only a tax lawyer and accountant can help with these and even they don't seem to know for sure.
How much of these Steem Dollars can actually be converted? If you can get it to an exchange, then at the price you exchange it for Bitcoin, that would be a conversion and income can be based on that. Again I'm not an accountant or lawyer but thats a way to go about it. Exchanges make it easier as you can just export your CSV, so send it over to Bittrex and convert your Steem Dollars to Bitcoin.
The price you convert it at once you convert, you can declare as the income. At least that is one way of doing it because we know for sure Bitcoin can be traded for US dollars on many exchanges. Steem Dollars can only be traded for Bitcoin and only on one or two exchanges at that.
Dana, there is some true wisdom in your post, eventually when we exchange into US dollars, we can gauge our aggregate income (at least an estimate). The trail from receiving the Steem currencies and getting to the US dollar "exit" event, and getting each year right in between, is the unclear path. If we were all receiving Bitcoin for authoring/curating, the taxable earnings event would be when Bitcoin reached our wallet, and then we would get basis, and compute a second gain/loss when later exchanging for USD. The Steem currencies creates some muddy additional steps.
I pretty much agree, with Bitcoin at least we know where the IRS stands to some degree. Also with Bitcoin there are exchanges like Coinbase which are regulated which convert Bitcoin into USD. There isn't a single regulated exchange for Steem that I know of and while Bittrex is semi regulated it's also the case that for whatever reason these exchanges are unreliable. Poloniex for example for a while wouldn't even let me get my Steem Dollars in and out at a predictable time and Bittrex while more reliable is still the only place to convert that I know of.
All I can say to the IRS is I'm doing my best with the information I have and understanding I have. There are more conservative approaches but those approaches are approaches few of us understand and even fewer can afford in terms of accountants and overall cost. It might even be the case with the most conservative approach that a person can owe more in taxes than their entire cash in bank income due to some weird interpretation of what is income.
I said this in another post but taking the conservative approach, suppose you earned a lot of Steem Dollars when the price of Steem is high and then we enter a bear market. So now your entire stash isn't enough to pay the taxes you owe?
The central question is at what point is a person truly in possession of "income"? A person can receive a token which only one exchange on the Internet is exchanging for some ridiculous price and then that one exchange can crash or stop trading, yet you owe taxes at the receipt price despite the fact that the exchange is unreliable?
If the goal for us bloggers is to both lower our risk of being audited as much as possible while also not paying more taxes than necessary, what can we do to protect ourselves? I'm not sure there is anything we can do even with the most conservative (costly) approaches. I suppose better tools, better exchanges, etc can all help but they aren't here yet.
If we are going to promote the conservative approach then we should be very concerned about Bittrex being the only semi regulated exchange for Steem Dollars and Steem. This is extremely risky as if that one exchange does go down then what are we supposed to do if we owe taxes which we can't pay due to no exchange? This scenario is actually something I'm personally worried will happen and have no idea what to do if it does.
Thanks Dana. What you are describing happens to stock compensation recipients all the time, you definitely ask all the right questions, you could have been a tax person :).
My overall plan is to not promote conservatism for conservatism sake, my goal to give people the information they would normally have to pay for (research and analysis) to make their own decision, and if the guidance supports a certain approach as a "bright line", I will share that information. This way, people will be better off whether they take a conservative or non-conservative approach, because there will be some level of technical guidance behind their decision (although it's impossible for me to give personal advice to any one person without their entire situation).
I think most people will not be able to afford to take the most conservative approach because there is no automated cheap way of doing it. Manually entering everything into a spread sheet is a full time job which can take weeks. And the Steemit site doesn't make it easy, and they could.
Provided that we can run the calculations then people can pay the estimated taxes just to protect themselves from future audit but that might not even work.