For U.S. Steemit Authors - The new Steem Dollar (SBD) Tax Dilemna (Because it couldn't get any more complicated)
The significant appreciation of the STEEM Dollar (SBD) creates a unique new tax issue for Steemit Authors.
General Tax
Bitcoin and other cryptocurrencies are treated as property for U.S. tax purposes (Notice 2014-21). The receipt of property for employment/independent services is taxable (Section 83).
In the case of Steemit, the Steem Dollar(SBD) and Steem Power(SP) rewards that U.S. Steemit authors/curators receive are taxable gross income to them (Section 83). The fair market value of the awards on the date of receipt is used to calculate the taxable gross income to the recipient (for example, value on an exchange).
Example
Initial Award
For example, if an author receives a 50/50 award valued at $10.000 USD (based on exchange prices), the author would have taxable gross income for the $5.00 worth of SBD and the $5.00 worth of SP. For future sales/exchanges of the earned SBD/SP, the author gets tax "cost basis" of $5.00 in the SBD and $5.00 of the SP, so that the author is not double-taxed in the future.
Exchange Steem Power(SP) for Bitcoin
When SBD/SP is sold or exchanged for another cryptocurrency, there is another taxable gain(unless like-kind exchange rules apply which is a hard argument). This means, if the SP appreciated from $5.00 to $20.00, and then is exchanged for Bitcoin worth $20.00, there is a gain on the exchange of $15.00 ($20.00 value of Bitcoin less $5 cost basis in SP).
Exchange Steem Dollar (SBD) for Bitcoin
Generally, while the STEEM Price fluctuates, the intention was to peg Steem Dollars to $1 US Dollar, so it's value was constant. In theory, if the $5.00 of SBD is exchanged for Steem (or sold for Bitcoin), the value of the SBD should still be close to $5, which is equal to the cost basis of $5. Therefore, any exchange of SBD would result in only getting $5 worth of STEEM or $5 worth of Bitcoin. This means, there would have been minimal tax impact on the sale/exchange of a Steem dollars ($5.00 worth of Bitcoin received less $5.00 basis in SBD = $0 gain)
The Problem
Now, the value of SBD is unhinged and fluctuates (in a positive direction for holders).
Exchange Steem Dollar (SBD) for Bitcoin today
In the example above, the author received $5 worth of Steem Dollars (SBD), estimated 5 units total. If the units were exchanged for Bitcoin today's value of $8.00 per piece, the value of the author's 5 units would be $40.00 However, their basis only $5. Thus, the gain would be $35 ($40 value of Bitcoin less $5 cost basis in SBD). The same would apply converting Steem Dollars into Steem. This means, additional attention should be paid to sales/exchanges of SBD (such as conversion into STEEM) or use for promotional costs (i.e. buying upvoting).
Takeaway
For users who are in the U.S. and have earnings from author/curation rewards, it may be time to start thinking about analyzing data & furnishing it to a tax advisor. For anyone looking for more general guidance, there are some additional resources on the taxation of Steemit awards below, which start from the "beginning" (these are not a substitute for finding personal tax advice).
Resources
Below are some general resources on the taxation of Steem earnings in the USA.
https://steemit.com/steemit/@cryptotax/are-steemit-author-and-curation-rewards-taxable-usa-edition
https://steemit.com/steem/@cryptotax/are-steemit-rewards-taxable-in-the-usa-part-2
https://steemit.com/steemit/@cryptotax/crunching-the-numbers-example-of-how-to-calculate-taxable-income-on-your-steemit-author-rewards-usa
Disclaimer: This series contains general discussion of U.S. taxes in a developing and unclear area of tax law. As always, you should consult your own tax advisor in your jurisdiction to determine your specific situation as this is not personal advice; and consider any future guidance by the Congress/IRS after the date of this article. Under Circular 230 to the extent it applies, this article cannot be used or relied on to avoid any tax or penalties in the U.S., its States or any other jurisdictions. Last, this article does not create a client relationship between author and reader.
Picture Credit
https://pixabay.com/en/users/geralt-9301/ (cover photo)
Coinmarketcap.com (SBD photo)
I hadn't thought about this. I doubt I'll earn enough this year to matter, but as our accounts and the site grows, it could be a consideration. But it's much too confusing for us to figure out without help. It would be incredibly difficult to figure out the value in USD of each transaction on each day. Wow, Yikes!
well your a dollar closer now :]
please resteem my last sent post although I might have send to much SBD...
hi, i paid you twice for upvotes but i never got anything back and there are no contact details on your page
Goodluck getting in touch with them. I've replied and mentioned them about 10 times over the last 2 weeks and not even an acknowledgement. They don't even get that many, if you scroll through thier replies you'll see all of mine sprinkled in. They're seeing them, they just don't care. @minnowpond
thanks.
Thanks!
hi there, i paid SBD twice to you for upvotes but i never got anything back and there are no contact details on your page
How long are they taking to credit the votes? they have not been made effective to my last transfer. This is the link; https://steemit.com/fotografia/@emily61/una-flor-extrana
Hello, again.
https://steemit.com/spanish/@emily61/concurso-reciclarte-navideno
How long are they taking to credit the votes? they have not been made effective to my last transfer.This es the link https://steemit.com/spanish/@emily61/concurso-reciclarte-navideno
@minnowpond: Today, I transferred $0.25 Steems for upvoting my post, but I have not yet receive the vote nor refund the amount uptill now, so please give the vote of my post, I will be very thankful to you, I am again sending the link of my post: https://steemit.com/marriage/@rizwanphe/best-moments-of-my-life-with-family-fellows
You will probably not recieve and @minnowpond will not respond. I tried everyday for 2 weeks and no acknowledgememt. Best to just not use thier service.
Yes dear minnowpond is not responding.
Could you please guide me that which bot is better?
I will be very thankful to you
@steemvote has a pretty good service. For .5SBD they do a resteem and 25 random upvotes from the vote network. This site has a list of a bunch with prices and what they offer though. http://s3.amazonaws.com/yabapmatt/bottracker/bottracker.html
I messed up sending sbd, I sent 9.2 instead of .2 I was wondering if this could be fixed and returned to me
Agreed it will be a challenge, although I have a few ideas for simple wallet GUI improvements that could help simplify the data aggregation. For example, it would be great to have the USD value of each transaction as a separate column in our wallet based on the largest volume exchange (i.e. Bittrex). And have the state displayed instead of being a "mouse-over" (for example over the mouse over 3 days ago, 4 days ago, etc.)
Steemit Inc. will not be issuing 1099's based on the last time I checked the FAQ section, so it is on each individual person in the U.S. to figure this all out or bring the information forward to a tax advisor.
Thanks, I appreciate the fact you're taking some proactive steps -- at least in bringing the matter to our attention. I wonder if taxes would be due for Steem left in wallets, or would it only matter if it was converted to USD. I suspect the former, but maybe the SP that we have to leave in the system for years wouldn't be taxable until it could be withdrawn. Oh, I have a headache. :)
The unleashed power of the atom has changed everything save our modes of thinking and we thus drift toward unparalleled catastrophe.
- Albert Einstein
@OriginalWorks
The @OriginalWorks bot has determined this post by @cryptotax to be original material and upvoted(1.5%) it!
To call @OriginalWorks, simply reply to any post with @originalworks or !originalworks in your message!
@cryptotax payed 2.0 SBD to @minnowbooster to buy a stealth upvote.
transaction-id 98a10277c20c36ffba3dd35e03cbbfed28f3335a
@stealthgoat
When streaming money arrives, the tax rules will have to change because it will be impossible for anyone to be in compliance. With every click on this platform, you're generating a transaction and it would simply take too long to do a tax return. It's a situation where your daily backups take 36 hours to do. Most people active on this platform will not be able to figure out the tax on every single micro transaction which is typically worth about a tenth of a cent. It would be akin to asking you to read the entire Library of Congress in one evening.
I already explained the situation to my tax accountant and she assured me that rule changes will be forthcoming because it will simply be impossible for anyone to be in compliance.
One more thing, since I run a software business, there's also the argument that all of the expenses I pay to the Steem blockchain can be construed as a business expense because it helps me promote my business, so which is it? Is it a capital gain or a deduction when I spend my SBD's for "advertising"?
Definitely valid concerns on your part. Form 1099 reporting by exchanges etc. would help simplify crypto compliance for many U.S. taxpayers (otherwise many will miss the compliance without a proactive approach).
Interesting question on the software business. Just curious if you could please give me an example of paying for expenses, do you mean paid upvote/resteem? I have an article coming out on the Steemit author deductions soon (aiming for January if not by end of year). Good luck and Steem on!
If I write a post such as this one and then send SBD or click on the promote button, is it not an advertisement? Sure it might get flagged if it comes across to spammy, but where is the line drawn? My accountant advised against claiming any of these as a deduction and said that unless money exits the platform that you can't count capital gains/loss.
However, because Steemit is a website that interacts with the blockchain, transfers between SBD's, Steem and Steem power could still be considered transactions that exit the platform (since the same could be done on Busy, eSteem, etc). The problem is that all of these clicks we make on the platform, are also transactions on the same blockchain and the ability to distinguish between these is lacking. Without it, this creates the assumption that every one of these must be taxed and then you're sometimes in a situation where you're being taxed multiple times on the same principle.
I'm an IT expert and have been studying the bitcoin architecture for a few months now. The rules will have to adapt because the banking system and government is lagging behind in both technology and understanding and they don't have the ability to know when a change of address is simply a change within the same account or to an external account because the hashing algorithm only works in one direction.
BTW, I don't use exchanges because you run the risk of being goxxed, so a 1099 form from an exchange won't help. When Lightning Network comes online, then it will make for extremely difficult tax enforcement. We are running into a perfect storm situation. I'm a diabetic and need to keep my ACA insurance, but because social security was used up for the Iraq war, the IRS has to tax us again in order to pay us seniors (there's an IOU in the SS Trust Fund signed by G.W.Bush).
Now with crypto beginning to cause an equity drain for the USD, Gresham's law will likely bring hyper inflation at some point. The end result being that government will no longer be able to function. My guess of time line for this happening is sometime in the next 5 years.
I think what will eventually happen is infrastructure inversion to the legal system. Business leaders will eventually become more powerful than government and will have to function as an interim government. People like Elon Musk, Mark Cuban, Jeff Bezos, etc, won't want to see all their work go down the drain, so I suspect that at some point, they will step in to fix the IRS or whatever agency is left to keep things running.
The bottom line is that the IRS is going to have to stop being stupid, quit with their abuse of power, quit coddling parasites, otherwise we'll all be dead.
This is actually very interesting and helpful but non of this is applicable in my country. @cryptotax
@minnowpond: I was transferred 0.25 SBD yesterday but I have not yet receive the vote of my post so please give the vote of my post. I will be very thankful to you
I am again sending the link of my post:
https://steemit.com/happy/@nouranga/best-wishes-for-all-the-steemit-community-members-for-2018