Vlog #25: My crypto tax thoughts. It sure will be interesting this year if it keeps going up.
Everything you do on the blockchain is recorded. Even though I believe the government has no clue how to handle this right now I'm sure that at some point in the future they will.
Let's say the year is 2023, they have finally realized how this works. They look back in time and see that I had a substantial dollar's worth of STEEM crypto that I didn't pay taxes over in 2017. I think that's fraud. Or tax evasion. It can't be good.
I don't want to hide anything. I want to pay my taxes. I don't mind it. It's good living in the Netherlands and I don't want to worry about these things. That's freedom too.
That's why I always included my crypto holdings in my tax return. (And it probably also has to do with my Dutch need to always play by rules.).
But if crypto keeps going up like it has in 2017 than it might be a little more than they used to this year.
So, I started to put money aside for this already. Just like I do for taxes regarding my company. I think that's a smart move.
But with Steem it's also different now. It's possible to earn crypto with Steemit and the Steem blockchain through content creations and I don't know if this is considered an income (income tax) or a property tax. I have no idea. I need help and I'm looking for it actively.
I talk about it more in my vlog.
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I think the whole tax system will need to be rethought. The tax system we have now was designed for 20th century economic models, where it was easy to follow the money and tax individuals/corporations accordingly.
Automation and robotics are already starting to erode the income tax base and this will accelerate in the coming years making it less ineffective. We are also seeing that that existing tax models do not work for blockchains and crypto money. Unlike before, everything is becoming decentralised and individuals have control of their money, not a centralised entity which can easily be audited. The fact that this money is created by the internet - which is everywhere - and not in a sovereign nation just adds to the complexities. All governments are struggling with this because they are trying to retrofit old tax laws to a new asset class and we're seeing that it doesn't work properly.
Also, don't forget, income tax has only been around for about 100 years. This is not a tax that existed for a long time historically. Perhaps it's time it's time it was scrapped it altogether since it is becoming less fit for purpose.
"Perhaps it's time it's scrapped altogether since it is becoming less fit for purpose"
100%
I was just thinking about this the other day. Living in the US, the definition of Cryptocurrency is rather murky. The government considers it a currency, hence the need for currency exchange license for crypto exchanges operating in the US, including FINCEN rules regarding Know Your Customer (collection of identity information for all customers).
Yet the IRS has defined it as property, so capital gains taxes would apply anytime it is exchanged for goods or services. Here is where it gets even stickier with Steemit, since your are being paid for work, which typically becomes a taxable event at the time the work is performed, not when the item of value that is transferred in exchange for work is sold.
My guess is the IRS would be very willing to accept taxes you pay on earnings from crypto sales or Steemit earnings, but if we would have a pull back at the end of the year, I believe they would be reluctant to allowing a loss deduction for the decline in market value.
It is going to be an interesting period that we are entering!
Until you withdraw anything into your bank account, tax cannot be applied.
Crypto currency is still considered as virtual currency by government... there cannot not be any tax for virtual currency. If they come with a law which accepts crypto currency as real currency then we should include it in tax returns.
that's been my understanding too.
The tax rules regarding crypto currencies are very vague here in the US. I hired an accounting firm who specializes in crypto (one of about 5 in the whole country) to do my taxes last year. I was so surprised at how ill-defined the rules were. I had a hefty bill but I didn't mind, like you, I would rather be transparent from the beginning.
I totally agree. I just want to have this all on the table. I have no interest in fines or worse. I rather pay my tax and be clean. Smart thinking hiring that firm. Atleast, you got it done right!
I don't give a shit about govt. I am free man. Yeah!!!!!!!!
LOL! Good luck!
haha. Thanks!!!
Yes, that's something I've thought a lot about too. I live in Australia so it's a bit different, but I did look up the taxation laws for bitcoin and other cryptos in Australia.
To the best of my understanding investments in cryptocurrencies don't encur tax if they are used for personal expenses, even the investment has appreciated in value. But they are taxable if the cryptocurrencies are used for business purposes. This is for Australia, but probably different for the Netherlands.
I pretty convinced it differs from country to country. This is good info for Australians. Last information I could find is that I would have to pay 1.2% over my total holdings. Which I would have no problem with.
Taxes are a really good topic to discuss and something a lot of Steemians probably haven't given much thought. Thank you very much for addressing this! Could save a lot of people a lot of trouble down the road.
It's a good thing to think about at least!
A very good thing. If this is not at the forefront of people's mind here on Steemit, and taken care of properly, it can become quite an issue! Have a great day! :)
You bring up a very, very important topic. @jerrybanfield recently covered this. Here is a couple links that might help:
(go to the last 1/3 of the video and he shows exactly how he's keeping track of his steemit earnings.)
https://steemit.com/steemit/@jerrybanfield/steemit-tax-calculation-and-payment-system
Here he goes into great detail about keeping records for taxes regarding Steemit.
I created a spread sheet and am keeping daily records as @jerrybanfield set forth.
Hope this helps as this is a very important topic that all Steemians need to keep track of. Great post and discussion! Resteemed
Thanks for the link! I'll check it out!
I neither I don't mind paying taxes but the government need to fix the problem, how to include my crypto holdings on my tax return when we don't have a cryptocurrency regulation.
Yeah, they better step up!
What a good video ... I expect 99% won't pay taxes on capital gains at all for a few years but you are right, the government can back track everything... time will tell 😭😂
That's the problem. You might think it's all secret now but it could potentially get back to you. For me, it's clear I want this straight from the start.
Totally makes sense... save that tax money guys lol