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Archives for Cryptocurrency

Blockchain Interview

  1. What Did You do before Blockchain?

Actually, the same thing as I am doing now, but with a different clientele. Before I got involved in blockchain, I was still an accountant helping business and individuals with their goals and planning. While I still serve the same clientele I did before, I now have a whole new set of clients that are very passionate about what they do, whether it is mining, investing or trading.

  • What Brought you into the Space?

My love for exploring new technology and looking for new areas to invest. I knew about Bitcoin since 2013 but foolishly brushed it off as a fad. As I watched it go up and ultimately crash a bit, it only confirmed (in my mind) that I was right. I kept my eye on it until the beginning of 2017, when I saw it started to show some life again and decided to finally jump in the mix. While making money from Bitcoin and other alts, I naturally, as an accountant, figured I needed to learn how the IRS treats the income made from crypto. I am more than excited I was brought into this industry and I am super excited at the speed this industry moves at.

  •  What’s Keeping You in the Space?

The potential for being on the cusp of an amazing new technology for our world is what drives me. My end goal for crypto is to be accepted the same as the dollar, euro, renminbi, etc., and part of that mainstream adoption is proper taxation. Governments simply will not allow people to make money without getting their part, but money people are being taxed on profits that have not actually realized in fiat. My dream is to help with the adoption of crypto in mainstream society, and believe it or not, I feel that taxation is a large part of that. Getting better tax laws and guidance from the IRS drives me to work harder for my clients.

  • What Lies Ahead for You?

This will be my fourth year working with clients who had cryptocurrency, and I hope to build my practice with more clients who are as passionate as they all were. I love working with my crypto clients, as they have a certain excitement and passion that really drives me. I am looking to continue to help as many investors, traders and miners minimize their tax liability while staying compliant with the IRS. The IRS is getting better technology to track those who own crypto and reporting the proper amount of taxes is more important than ever.

  • What Blockchain Developments are you Following?

I tend to focus more on the finance side of the blockchain developments, so ETF of course is near the top for me. Also, there is a lot of movement from the large financial institutions to incorporate crypto into people’s retirement accounts, which is huge. This tells me more people are requesting the product, and the companies are complying. Canada just passed a law about tax-free IRAs incorporating Bitcoin, which again, is great news that is moving the industry as a whole forward.

  • Who’s Your Top Influencer Inside the Blockchain Space?

I know I may be different than others in the blockchain space, but I tend to stay away from YouTube and Twitter and just do lots of reading on different sites to get my news. I read lots of different sources so that I can get different perspectives on things, such as mainstream and industry-specific sites. Specific people that I find interesting, though I may not always agree with, are guys like John McAfee and Roger Ver. Oh, and I did meet the guys from Crypto Street Podcast and listened to their panel at a crypto convention and they were very interesting and knowledgeable.

  • Who’s Your Top Influencer Outside of It?

This may sound cliché or corny, but my wife. She pushes and drives me like no one else in the world can, and without her, I don’t think I would be where I am at today. She celebrates the highs with me and kicks me in the butt to get me out of my lows and come out as a better person, so without a doubt, she is my influencer in life.

  • Where Do You See Yourself in 5 Years?

In the blockchain space, 5 years can feel like a lifetime. I hope to see myself, though, as an authority and influencer in the blockchain industry on accounting and tax. The accounting and tax laws that deal with crypto is extremely vague and new, and guidance from the IRS was last issued in 2014. As you all know, much has changed in 4 years, so I hope to help carve out what taxation will look like. Also, I feel as though taxation is one of the last big hurdles crypto will have to face in 1st world countries to obtain true mainstream acceptance. Tax laws currently are too cumbersome for any person to be able to use it daily to replace cash if they want to be reporting their taxable income in compliance.

  • What do you want people to know about your business?

As I have said before, I am an accounting and tax professional with over a decade of experience in public and private accounting. One of my specialties in the accounting world is cost accounting, which I feel flows well with blockchain accounting. Cost accounting breaks things down on such a small level and allows me to properly understand the true cost of business, which directly correlates to the crypto mining and investment industry. I have worked with over 60 clients alone in the 2017 tax year, my first year that I really dealt with crypto clients. I continue to be involved in the industry and learning how to properly account for it and have a great passion for the crypto community. I have spoken at a crypto convention about taxation and would love to continue doing this at other events. Finally, I also work with a mining company, Windfall Mining, as their CFO. They are doing some great things in the industry as well and I am more than happy to be a part of their project.

  1. How can someone get in contact with you?

You can find me at www.BryanShearer.accountant or contact me on my office phone at 717-639-2550. You can also find me on social media on Facebook under Shearer’s Accounting & Tax Service, Twitter at @shearersaccount or on LinkedIn under my name Bryan Shearer. I am more than happy to answer questions you may have, so feel free to email me at tax@bryanshearer.accountant or use the form on my website. Thanks so much for this great interview and it was lots of fun talking about the blockchain industry!

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US Tax Laws Continue to Stifle Bitcoin Mainstream Usage

With the announcement of the new cryptocurrency, Libra, being developed by Facebook, this stablecoin once again shows that tax laws are out-of-date with how the current market works. We have seen time and time again that our legal system is outdated in the way that they handle digital matters by trying to apply old laws to new technologies. This is true in cryptocurrency as well, as the only guidelines we have currently are from 2014 and tell us that Bitcoin and other cryptos are property.

The Problem with the Property Definition

The definition of property was an easy fix, a band-aid type of decision by the IRS in hopes that Bitcoin would die out and that they would not have to make any real decisions. This is my opinion solely, but I believe the IRS did not take Bitcoin seriously but wanted to collect taxes from the profits, so they threw something together. This gave them a basis to collect taxes, but they did not have to put in the extra hours developing new tax codes specific to the crypto industry because they thought it would phase out.

However, cryptocurrency kept evolving and becoming stronger, and in turn, started to involve more people, more technologies and more situations where people were making money from crypto. It wasn’t just a simple buy at this price, sell at this price situation anymore where it was easy to determine the taxable gain. They never realized how quickly this technology would take hold and create multiple taxable situations.

The property definition is very broad. Can it be treated as real estate? If so, does that mean a 1031 exchange can be done when buying Ethereum from Bitcoin? We already know this answer, as the IRS stepped up to knock this question down before everyone started submitting 1031s. How about forks? What about air drops and halving? How do we determine the basis there and when is it a taxable event? Again, there are multiple theories on both sides, but with the IRS not clarifying how to handle it, tax professionals are doing their best to interpret the existing code to the situation in front of them.

Stablecoins AREN’T Currency

Just like any other crypto, stablecoins like Libra are not a functional currency, though they can act like it. With current regulations, the IRS requires crypto traders and investors to report each transaction they perform with crypto. Every time that you exchange one crypto to another, buy something with crypto, or exchange crypto to fiat, these are taxable events. Will the IRS expect you to report every time that you use Libra for a purchase?

In theory, if a person used strictly a stablecoin as their main form of transacting in the world, their entire financial record could be easily viewed by the IRS. Basically, you would be giving your bank record to the IRS and telling them exactly how much you spent at all times. Sure, on the 8849, you just list the date of the transaction, but in an audit situation, they could easily dig deeper here. And yes, any audit could dig deeper, but putting all your individual transactions from daily life is not the purpose of a tax form.

Libra Coin Cannot Work in This Environment

Libra Coin is an attempt to use an enormous database of current users to help spur along the growth of worldwide digital currency. While decentralized in name, Facebook will still be control of it and we know how that story ends. Also, privacy concerns are already plaguing this coin. People want to make money in crypto at this stage, and while yes, the end goal is a currency backed by the blockchain, it is not viable in the real work yet. Using a coin like this would be cumbersome and while the initial hype may make it popular, the hype will die off when people understand the true maintenance of using the Libra coin in the mainstream world.

How to Change Crypto Tax Laws

There is no perfect answer to this yet. One popular solution that is similar to foreign currency is that you pay taxes when you cash out. Sure, you put $1,000 in, take $2,000 out and pay taxes on $1,000 and that is done. Sounds easy, but there are a million loopholes in there with crypto unlike foreign currency. What happens if you buy something with crypto? Is that cashing out? If so, we are right back where we were before. And if it is not cashing out, look at this situation. You put $50,000 in and hit it big and have $300K in crypto now. You decide to buy a Lamborghini with that $300K all in crypto, never cashing to fiat. Now, you drive that Lambo into the ground and 10 years later, you sell it for $50K in fiat. If you are just looking at the value from when you put into when withdraw, it is now showing a wash. So, in essence, you avoided a tax on the $250K in income by being able to drive an exotic sports car around. Somehow, I don’t think the IRS would agree with that.

In the end, tax laws need to change, and they need to fast if we want to see real change in mainstream acceptance. Stablecoins released by the world’s richest companies won’t do the trick.

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