Worrying about Tax consequences of Bitcoin Spending – Mental BurdenAugust 9, 2019
Erik Voorhees, CEO of ShapeShift, discussed the seriousness of the Bitcoin tax problem at the Bitcoin 2019 conference in San Francisco.
Bitcoin payments are taxable events. When anyone is buying something with Bitcoin, they need to be tracking the capital gains they accrue because a Bitcoin payment is at par with selling one of Bitcoin holdings. The purchase can be anything from the purchase of a coffee to anything that can be named.
Voorhees expressed concerns about an average person on the street who would want to buy something for $20 with the Bitcoin. The person might not care about reporting taxes on such purchases. When considering the spending power, these people represent a very tiny amount. The true majority of spending power comes from people with more money. It is those people who have more money worry about the tax consequences of Bitcoin spending.
Using Bitcoin is about making a political statement, but many of them are not merely bothered about making any statements when they spend their Bitcoin. They want to use it and no purpose beyond.
The associated tax burden overshadows the potential benefits of using Bitcoin. Even those who are completely cool with the volatility of Bitcoin, and even those who are okay about paying $5 on $50 transaction land in trouble for not correctly tracking what they spent. They need to spend sometimes to report it and track it, but the real cost is paid when they do not track it accurately.
Sergej Kotliar, Bitrefill CEO opines that “A government who will be behind everyone who will be purchasing a cup of coffee with Bitcoin is going to appear silly.” Further added that the idea is not to use Bitcoin to avoid taxes, but it is something that makes the regulator’s job too difficult.
Andries Verschelden, Blockchain practice leader recently stated, “With more fintech companies, banks and brokerages exploring ways to mainstream cryptocurrency, it made sense for Armanino to build the infrastructure necessary to accept cryptocurrency payments for what we expect to be a growing form of payment.”
Verschelden further stated, “As digital asset use and adoption increases and new types of transactions are made, such as security token offerings (STO) on public blockchains, the need for third-party assurance tools continues to grow.”
Of note, Armanino, US-based accounting and consulting firm are accepting payments in more than 1000 cryptocurrencies.
Tracking every Bitcoin payment and the tax implications increase the mental burden of having to do it.