International cryptocurrency payroll service provider Bitwage has announced that it has partnered with Texas-based Simply Efficient HR. The move will allow companies to pay W2 employee and payroll taxes in all 50 U.S. states, plus Puerto Rico, using BTC and ETH.
Bitwage and Simply Efficient Join Forces
With Bitwage’s solution now out of beta, American employees are able to choose any percentage of their wage to be in USD or cryptocurrency. To participate, a company needs to sign up to Bitwage, reach out to support for Payroll & HR services to receive personalized account management from the Simply Efficient HR team, and then add the account on Bitwage. Simply Efficient HR invoices companies through Bitwage for USD needed to fund payroll taxes and employee payrolls and the company accepts invoice and fund payrolls in BTC or ETH.
CEO of Bitwage Jonathan Chester commented: “As the leader in cryptocurrency payroll solutions, we are excited to continue to push the adoption of real use-cases within the industry. Together with Simplexity, we hope to close the financial loop within the cryptocurrency industry and continue to make bitcoin and other cryptocurrencies a part of everyday life.”
Bridging the Gap to the Traditional Financial System
The partnership has been live in beta mode since November, with its first customer the peer-to-peer exchange Paxful. “Bitwage bridges the gap between bitcoin and the traditional finance system,” Hayel Abbassi, Paxful Controller, said. “As a company that earns 100% of revenue in bitcoin, we are always looking for service providers who will accept digital currency. Paxful has a significantly sized team in the states and we need to pay them as employees on payroll, not as contractors. Bitwage has recently formed a partnership with a traditional payroll company who integrates into their platform to provide these services. Paxful simply sends bitcoin to an address, and our employees receive net checks with the proper federal and state taxes withheld.”
According to the announcement, U.S. Bitwage clients are also able to pay for benefits such as health insurance, as well as HR compliance services. Companies around the world are able to use their crypto holdings to pay local vendors in the U.S., E.U., U.K., Brazil, Philippines, India, Mexico, Argentina and other regions.
The Information Reporting Program Advisory Committee is a body which was established before the Internet was a major consumer network and is a result of federal government reorganization and, importantly, efforts to modernize and improve the IRS brought about by the Omnibus Budget Reconciliation Act of 1989. The committee periodically suggests actions the IRS needs to take in order to improve its operations, specifically relating to how the IRS gathers information about taxpayers.
This year’s public report is of interest to cryptocurrency advocates and participants because it specifically directs the IRS that it needs to be clearer on how it deals with Bitcoin and other cryptocurrencies.
In the past few years, with the innovative rise of technology throughout the financial sector, there has also been a rise in the popularity of investment in cryptocurrency. However, with the popularity of cryptocurency, there has also been an equal rise in questions as to the applicable tax consequences that apply to it. While we acknowledge and thank the IRS for publishing Notice 2014-21, which provides that virtual currency is treated as property for U. S. federal tax purposes, many industry and tax practitioners still question other tax consequences of cryptocurrency transactions. […]
Therefore, IRPAC recommends that the IRS issue further guidance on the tax consequences of cryptocurrency transactions.
The tax situation regarding cryptocurrencies has long been a subject of interest and debate in the crypto community. Unclear guidelines and the occasional prosecution of unregulated exchanges have made it difficult for users to know quite how to act, and as a result few are willing to admit they have cryptos.
One problem is that cryptocurrencies and their related service providers are overseen by multiple agencies. Everyone from FinCEN, the IRS, the Treasury, other federal regulatory bodies, and state agencies have a say in how people legally use the currency.
Coinbase Case Used As Example
In the more detailed recommendation regarding clarification of crypto regulations at the IRS, the Committee used United States v. Coinbase Inc, a case which decided that Coinbase has no legal remedy in providing information to the IRS about transactions over $20,000.
The Committee writes:
A good illustration of the difficulties of tax enforcement in this area may be found in a recent case. […] During 2013 through 2015, Coinbase maintained over 4.9 million wallets in 190 countries with 3.2 million customers served and $2.5 billion exchanged. The Coinbase summons initially sought “information regarding United States persons who, at any time during the period January 1, 2013 through December 31, 2015, conducted transactions in a convertible currency as define in IRS Notice 2014-21.” That request was later narrowed to Coinbase users who “bought, sold, sent or received at least $20,000” worth of cryptocurrency in a year.
The Committee believes that Americans would by and large be more open to reporting their crypto holdings and proceeds if they had more clarity in the consequences of so doing.They believe that as a result of the Coinbase summons and the lack of clarity, people will be more likely to use offshore exchanges in order to protect their assets.
Many, if not most, taxpayers will report these activities correctly if they are able to determine the implications of their cryptocurrency activities. Some taxpayers will be tempted to do otherwise, however because anonymity is inherent in the structure of the blockchain activities. In light of Coinbase,these taxpayers are likely to use exchanges outside the jurisdiction of the US.
It is important to note that the IRS is not required to follow the guidance of the IRPAC, but historically it has used the recommendations to modernize the way it handles its business. Those who wish to transact in cryptocurrencies legally can only hope that IRS heeds the advice of the IRPAC and implements clearer regulations in the coming months.
Is it really a surprise that America’s security detail can see your crypto-fiat transfers?
An official from U.S. Homeland Security has claimed that the authorities can trace every crypto to fiat currency conversion. Is that really a surprise in the modern age of surveillance?
He was talking about international drug dealers bringing vast quantities of Fentanyl into the US to sell on the Dark Web, but the inference is clear: Big Brother is watching the crypto market and the days of anonymity and free money are coming to an end.
Matthew Allen, Assistant Director of Domestic Operations with Homeland Security Investigations, appeared before the US Senate on October 3rd to discuss cryptocurrencies and how they are being used and abused by drug traffickers.
He said: “On dark net marketplaces and other ‘unindexed’ websites, purchases are often paid for with cryptocurrencies such as Bitcoin and Monero, among many others.”
Monero and Litecoin are both big players on the Dark Web and some criminals actively avoid Bitcoin due to personal security concerns. At some point, though, the money has to come out of the crypto sphere and into the real world.
Allen claimed that the on- and off-ramps to the cryptocurrency world are the best spots to apprehend wrongdoers. “Whenever monetary exchanges are made, a vulnerability is created,” he went on to say. “This is the time when criminals are most susceptible to identification by law enforcement.”
Allen continued with “Utilizing traditional investigative methods such as surveillance, undercover operations, and confidential informants, coupled with financial and block-chain analysis, ICEHSI is able to disrupt the criminals and dismantle the TCOs, [transnational criminal organizations] as well as the cryptocurrency exchangers who typically launder proceeds for criminal networks engaged in or supporting dark net marketplaces.”
After localbitcoins was mentioned by name:
“Targeting these illicit P2P exchangers helps to pull back the veil of pseudo-anonymity provided by virtual currencies. Through interviews and suspect cooperation, along with forensic analysis of computers, mobile phones, and other seized electronics, as well as the use of advanced blockchain tracing tools, ICE-HSI can identify other criminals using virtual currency to fund and further their illicit activities.”
The IRS is Coming
The main takeaway is that there is a way for the government’s prying eyes to get into your crypto trades. The IRS has already sued Coinbase for full details of its users and it’s clear that cryptocurrency taxes are a fact of life already.
Allen was speaking of more nefarious users, but blockchain analysis, powered by AI, could turn the IRS into a bloodhound for every stray dollar. If that happens, it will be easier to report our income in real time, on an IRS-linked blockchain system.
The window of opportunity for under-the-counter earnings in cryptocurrency is closing fast, and the very tools that helped people get rich anonymously will eventually shut tax evasion down.
Blockchain is in Government’s Future
Blockchain technology is finding a foothold in government departments all around the world and income tax is basically tailor-made for the blockchain. It’s a vast number of numbers and files that can be broken down into individual digital ledgers. AI can calculate everybody’s taxes as they go, identify issues ahead of time and give you a simple roadmap for your finances.
When technology gets to that stage, it will likely be plugged into your bank account and cryptocurrency exchanges. It will do the math for you, but it won’t miss a single cent. It will be a simpler system, and could make it more difficult for criminals, secret crypto traders and tax evaders alike.
The AICPA recently asked the IRS for some equitable relief by adopting a “de minimus election,” which provides a $200 threshold for excluding capital gains income on personal transactions.
Join in the fun and play on the world’s First Hybrid on-line Casino with BTC and Fiat currency payments. Check on-line for latest promotions
If a taxpayer purchases virtual currency (cryptocurrency) and spends it on personal use, the IRS requires him to calculate a capital gain or loss on each transaction. Capital gains on personal-use property are reportable and subject to tax, whereas, the IRS disallows capital losses.
The AICPA recently asked the IRS for some equitable relief by adopting a “de minimus election,” which provides a $200 threshold for excluding capital gains income on personal transactions.(See the AICPA letter and an excerpt of the de minimus rule proposal below.)
If a taxpayer acquires virtual currency as an investment, though, then all capital gains and capital losses are reportable, and the de minims rule should not apply.
The AICPA suggests the IRS apply a similar de minimus rule used for foreign currency transactions in Section 988(e)(2) (see below). The code section refers to personal purchases, not Section 162 business or Section 212 investment property. For example, if a taxpayer acquired Euros for a European vacation, the de minimus rule applies, and the taxpayer can exclude capital gains on the Euros spent if the capital gain is under $200 per transaction.
The IRS does not permit taxpayers to deduct capital losses on personal-use property, including foreign currency or virtual currency held for personal use. Taxpayers may not deduct capital losses on the sale of a private auto or a primary residence.
Examples of using crypto for personal use vs. investment property
1. Joe purchased one Bitcoin in early 2017 for personal-use spending, and his Bitcoin rose in price substantially during the year. Joe planned on many vendors adopting Bitcoin as a means of payment. Joe’s original intention was for personal use, so a de minimus exemption should apply to him if the IRS approves that AICPA recommendation*. If Joe bought Bitcoin in 2018, he might have a capital loss, which would be non-deductible on personal-use property.
2. Nancy invested in 10 Bitcoins in early 2017, and her intention was capital appreciation and diversification into a new asset class. She spent Bitcoin frequently during the year on personal transactions, buying goods and services wherever Bitcoin was accepted. She hoped it would be tax-free, but it’s not.
The intention of the taxpayer is critical in determining tax treatment. If the aim is for personal use, then the de minimus rule should apply to capital gains under $200, and capital losses are not deductible. If the intention is for investment, then it’s capital gains and losses. If the purpose is for business, ordinary gain or loss treatment applies.
With tax treatment hinging on category (personal use, investment, and business), it’s wise to segregate cryptocurrency into these buckets carefully. If the IRS agrees with the AICPA proposal on the de minimus exemption, declare a crypto wallet for personal use, and the rest as an investment to protect capital loss treatment on the bulk of your crypto that you don’t plan to spend.
Excerpt from the AICPA letter
4. Need for a De Minimis Election
“Overview: Some taxpayers may only have a minimal amount of virtual currency that is designated for making small purchases (such as buying coffee). Tracking the basis and FMV of the virtual currency for each of these small purchases is time consuming, burdensome, and will yield a de minimis amount of gain or loss. A binding election applicable for a specified amount of virtual currency is beneficial to taxpayers.
Currently, section 988(e)(2) allows for an exclusion of up to $200 per transaction for foreign currency exchange rate gain, if derived from personal purchase. The same exclusion should apply to virtual currencies even though they are considered property rather than foreign currency.
Q-9: May individuals use a de minimis rule for virtual currency similar to the section 988(e)(2) exclusion of up to $200 per transaction for foreign currency exchange rate gain?
A-9: Yes. Individuals may use a de minimis rule, similar to section the 988(e)(2) exclusion, for virtual currency transactions to alleviate the burden or recordkeeping for individuals who use virtual currency as a medium of exchange. This de minimis rule allows taxpayers to exclude transactions resulting in $200 or less of gain.”
Section 988(e)(2) Exclusion for certain personal transactions
(A) nonfunctional currency is disposed of by an individual in any transaction, and
(B) such transaction is a personal transaction,
no gain shall be recognized for purposes of this subtitle by reason of changes in exchange rates after such currency was acquired by such individual and before such disposition. The preceding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200.
(3) Personal transactions. For purposes of this subsection, the term “personal transaction” means any transaction entered into by an individual, except that such term shall not include any transaction to the extent that expenses properly allocable to such transaction meet the requirements of—
(A) section 162 (other than traveling expenses described in subsection (a)(2) thereof), or
(B) section 212 (other than that part of section 212 dealing with expenses incurred in connection with taxes).”
(Note: Section 162 is for business, and Section 212 is for investments.)
* The IRS has made no indication that they intend to adopt all, or any, of the many excellent recommendations from the AICPA.
Here at Dollar Destruction, we endeavor to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research! Source
Author: Robert Green Image Credit
Cryptocurrency investors and traders aren’t the only ones pleading with the Internal Revenue Service for more clarity on crypto taxation.
Join in the fun and play on the world’s First Hybrid on-line Casino with BTC and Fiat currency payments. Check on-line for latest promotions.
The American Institute of Certified Public Accountants, the world’s largest professional association for accountants, joined the chorus on Wednesday by calling for additional guidance on matters like gain and loss reporting, expenses related to cryptocurrency mining, chain splits, air drops and more.
The IRS released preliminary guidance in 2014, known as Notice 2014-21, deeming that it considers virtual currencies as property for taxation purposes. While the cryptocurrency ecosystem has exploded in interest and market size since then, the agency has not released any additional guidelines despite pleas from the industry to do so.
“Virtual currency transactions, in which taxpayers increasingly engage, add a new layer of complexity to the analysis of a client’s reporting requirements,” Annette Nellen, chair of the AICPA Tax Executive Committee, stated in a 21 page letter from the group to the IRS released Wednesday, adding:
“We recommend the Internal Revenue Service release immediate guidance regarding the tax treatment of virtual currency transactions, similar to that of Notice 2014-21 so that authoritative guidance exists.”
AICPA claims more than 400,000 members across 143 countries. Its recommendations were developed by a Virtual Currency Task Force and approved by the AICPA Tax Executive Committee.
The letter spelled out a list of 12 specific areas in which more guidance is needed.
“Specifically, we request additional guidance that will address items from the original Notice 2014-21, and new issues that are relevant to the 2017 tax year, such as chain splits, that have arisen subsequent to the release of the original notice,” Nellen states.
Another area of focus is the current confusion in determining fair market value in a “reasonable manner” when virtual currency is spent or obtained. The letter emphasized that the prices of Bitcoin and Ethereum can differ widely at any given time depending on the exchange upon which they are being transacted.
Also highlighted was the documentation headaches posed by the required specific identification method for tracking capital gains and losses any time a transaction takes place.
“Taxpayers are required to specifically identify which virtual currency lot was used for each transaction in order to properly determine the gain or loss for that particular transaction. In many cases, it is impossible for a taxpayer to track which specific virtual currency was used for a particular transaction,” Nellen stated, while recommending that the IRS make available a “first in, first out” (FIFO) tracking option as well.
The AICPA letter also called for a de minimis rule that would exempt any transaction under $200 from taxation. Noting that such an exclusion currently exists for foreign currency transactions, it urges that “[t]he same exclusion should apply to virtual currencies even though they are considered property rather than foreign currency.”
Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!