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beep boop. it’s complicated.

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beep boop. it’s complicated.

GM. おはよ。珈琲淹れるよ。

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GM. おはよ。珈琲淹れるよ。

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Transportation

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Transportation

Hi Hi

Still have one piece avialable on opensea

“Soul flowers”

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Hi Hi

Still have one piece avialable on opensea

“Soul flowers”

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Read Thread
Let's talk about Crypto Taxes. We reached out to our fren, @JaiminDesai93, founder of @ReconcileMoney, for help. He wrote a great blog post, and the highlights are below. If you have a Crypto Tax question not covered, let us know with a comment. Let's dive in... 👇
2/ We're going to cover 6 questions (1 of 2) • How are NFTs taxed? • I got paid in crypto for consulting work. How will I get taxed? • How are yield farming and staking taxed?
3/ We're going to cover 6 questions (2 of 2) • If you’re airdropped something but don’t claim it, is that income? • What should I do with worthless NFTs? • What’s better for taxes - filing personally or as a business?
4/ FUTURE NFT MINTS DISCLOSURE We've tried to ensure accuracy, but in general, you want a tax professional advising you, not Twitter. Speak to a tax professional before making any tax / financial / investment decisions. Not Financial Advice (NFA). Do Your Own Research (DYOR).
5/ You can find the complete version of the doc that this thread highlights with more references and details at http://getreconcile.com/crypto . You should read it. There's a ton of good info that digs into IRS classifications plus the nuanced details that truly matter.
6/ Crypto Tax Guide Written by @JaiminDesai93, founder of @ReconcileMoney We wrote this for our frens at Future NFT Mints who are helping bring more transparency to Crypto, Web3, and NFTs with regular detailed analysis. They had tax questions. We found the answers.
7/ As a founder of a startup (@ReconcileMoney) that is focused on optimizing capital gains tax, I receive a ton of questions from new and experienced crypto investors. I’ve decided to start this thread as a non definitive guide to tax implications in the emerging crypto economy.
8/ As a disclaimer, please note that the IRS still hasn’t issued crystal clear guidance when it comes to crypto, specifically DeFi and NFTs. Guidance to some of the questions will come from case law and rules for similar assets/investments.
9/ Special thanks to @fintaxdude and @EmDeeEm for help putting this together!
10/ How are NFTs taxed? (1 of 5) Investing in NFTs may have up to 3 taxable events. 1️⃣ If an NFT is purchased using crypto, this transaction would trigger a capital gain/loss taxable event. A new holding period would begin for the NFT.
11/ How are NFTs taxed? (2 of 5) 2️⃣ If an NFT is sold for crypto, or swapped for another NFT, this would trigger a new capital gain/loss taxable event. 3️⃣ In the event this crypto was converted to USD, a third taxable event would occur in this transaction.
12/ How are NFTs taxed? (3 of 5) In summary, the investor would be taxed on the price appreciation of ETH or other crypto from the time they bought and converted into the NFT or USD.
13/ How are NFTs taxed? (4 of 5) Creators of NFTs are taxed in a different way compared to NFT investors. While creating the NFT does not trigger a taxable event, selling an NFT in exchange for crypto or other compensation would.
14/ How are NFTs taxed? (5 of 5) If a creator sells an NFT for crypto, the creator would be taxed as ordinary income on compensation received. If creator does not convert crypto to USD immediately, a new capital gains holding period begins for crypto received in the sale.
15/ I got paid in crypto for consulting work. How will I get taxed? (1 of 4) In most cases, income received as crypto is taxed as ordinary income. This would be determined by fair market value on date the crypto's received. This income is taxed based on individual’s tax bracket.
16/ I got paid in crypto for consulting work. How will I get taxed? (2 of 4) Two important things to note if you’re being paid in crypto as a 1099 contractor or otherwise.
17/ I got paid in crypto for consulting work. How will I get taxed? (3 of 4) 1️⃣ Taxes likely won’t be withheld, so the individual receiving crypto as income will need to keep track of this income and be aware of any estimated taxes that need to be paid.
18/ I got paid in crypto for consulting work. How will I get taxed? (4 of 4) 2️⃣ It's important to record fair market value at time of receipt to determine capital gains/losses and duration held when selling crypto for USD or using it to purchase a good or service - like an NFT!
19/ How are yield farming and staking taxed? (1 of 4) Today, interest earned through yield farming strategies would be taxed as income. However, liquidity pool transactions will likely be taxed according to capital gains. The IRS has not issued clear guidance on this area.
20/ How are yield farming and staking taxed? (2 of 4) Tax professionals and investors should be conservative when calculating yield farming taxes. Staking rewards should be taxed as ordinary income at fair market value at time of receipt, according to guidance issued by the IRS.
21/ How are yield farming and staking taxed? (3 of 4) Hence, it’s important to keep track of when you received crypto from yield farming and its value at the time you received it. These two things will help you determine your duration of holding and net gains/loss on the reward.
22/ How are yield farming and staking taxed? (4 of 4) For additional reading, here’s a strong point for why staking shouldn’t be considered income - perhaps the IRS will change its mind! https://www.proofofstakealliance.org/wp-content/uploads/2021/05/Tax_Treatment_of_Block_Rewards__A_Primer__v.1.7__for_new_POSA_branding__5_26_2021.pdf
23/ If you’re airdropped something but don’t claim it, is that income? (1 of 4) This is a very gray area with little guidance from the IRS.
24/ If you’re airdropped something but don’t claim it, is that income? (2 of 4) Based on precedent, airdrops will be taxed as ordinary income (i.e. short-term capital gains rates), generally, when the assets are recorded on ledger and/or enter your wallet.
25/ If you’re airdropped something but don’t claim it, is that income? (3 of 4) So if you don’t claim, you won’t have control of the asset and shouldn’t get taxed.* When you sell the airdrop, it’ll be subject to capital gains tax rates.
26/ If you’re airdropped something but don’t claim it, is that income? (4 of 4) Not related to tax, but be careful claiming unknown airdrops as some of those smart contracts hide malicious code that may drain your wallet.
27/ What should I do with worthless NFTs? (1 of 3) First, try selling them for nothing (ie 0) on a marketplace such as @opensea @MagicEden_NFT @SolanartNFT. If this doesn’t work and if your NFT clearly has no value, there is a chance that you could deem it a worthless security.
28/ What should I do with worthless NFTs? (2 of 3) Learn how the IRS says to deem a security worthless. https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/losses-homes-stocks-other-property/losses-homes-stocks-other-property-1
29/ What should I do with worthless NFTs? (3 of 3) BUT if you deem a security worthless and later it has value, be prepared to pay taxes when you sell. Before deeming a security worthless, contact your tax advisor.
30/ What’s better for taxes - filing personally or as a business? (1 of 5) In general, a single member LLC is a disregarded entity and offers zero TAX benefit over being a sole prop.
31/ What’s better for taxes - filing personally or as a business? (2 of 5) Depending on the type of incorporation (e.g. LLC vs. C-corp), you may be able to write-off expenses related to trading crypto (or mining it) and any capital losses incurred.
32/ What’s better for taxes - filing personally or as a business? (3 of 5) So if you’re a miner and you’re scammed out of coins, you can deduct that loss on your business return. Also, trading crypto inside of a C-corp will most likely result in you paying a ton more in tax.
33/ What’s better for taxes - filing personally or as a business? (4 of 5) Filing as a business will introduce additional complexity but may be worth it for active investors with large, diversified portfolios.
34/ What’s better for taxes - filing personally or as a business? (5 of 5) We highly recommend chatting with your tax advisor about this before making a final decision as there are a lot of moving pieces to this.
35/ Reminder The complete version can be found at http://getreconcile.com/crypto . You should read it. There is a ton of good info that digs into IRS classifications, and as well as nuanced details that truly matter but don't fit in a thread.
36/ Final Disclosure by @futurenftmints Taxes can be complicated. We tried making this straightforward and plain English, but it's possible your situation is unique. It's important that you speak with a tax professional before making any decisions. NFA. DYOR.
37/ Last Word If you liked this tweet thread, please like, comment and follow ✌️ If there's a tax question you'd like answered, please tell us below. Thanks for reading to the end!

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futurenftmints (.eth, .sol)

A story about the color green

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A story about the color green

3 weeks ago

Stream Glow by Voyage on desktop and mobile. Play over 265 million tracks for free on SoundCloud.

GlowStream Glow by Voyage on desktop and mobile. Play over 265 million tracks for free on SoundCloud. soundcloud.com

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Stream Glow by Voyage on desktop and mobile. Play over 265 million tracks for free on SoundCloud.

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