What's a "virtual currency"? The IRS helpfully defines the term on its website. It also gives some examples: "Bitcoin, Ether, Roblox, and V-bucks are a few examples of a convertible virtual currency."
I'm trying to figure out the proper way to answer this question for my clients who have kids who play Fortnite. World of Warcraft could also give cause to answering yes to the virtual currency question.
I thought that this didn't sound right, and looked it up. Apparently you can't actually transfer vbucks between accounts, so the irs got it wrong.
Either way, this is an absolutely terrible concept and should not be enforced. You can't equate trustless, "actual" digital currencies such as BTC, ETH with ingame currencies that are actually just rescindable licenses from a single private entity that can be revokved at any time for no reason. A kid buying vbucks from epic games is in no way comparable to buying bitcoins online from a random third party.
I get converting crypto to fiat being a taxable transaction, but the whole notion of crypto-to-crypto trades being taxable is stupid, imo. Same thing with paying for something with crypto. You're getting taxed twice. First, there's sales tax on the purchase, and then you have to pay capital gains on the crypto you used for the purchase on top of it?
If there MUST be a tax, then it should happen when a cryptocurrency is exchanged for tangible goods, licensed software, or institutionally backed currencies. Otherwise trading open source software for open source software gains you NOTHING until you trade it for something guaranteed to be useful. We might as well tax the exchange of oxygen for CO2 for every breath you take based on the current value of gasses. It's nonsense, and pure greed.
Good lord, I just read through the IRS-crypto FAQ. If a hard fork occurs and you get an airdrop you're required to pay taxes on your new coins.
We should be able to file for losses due to inflation the moment we trade our dollars for goods and services.
I don't mind paying taxes if they're being used properly (which I don't think they are in the US). But the system needs to be simplified substantially. However, there are lobbyists in DC right now who fight to keep taxes convoluted to the point where the average citizen cannot calculate their taxes on their own. I imagine the IRS will need to greatly expand their reach and capabilities in the coming decades, or the system will effectively become ineffective.
Considering that the US is effectively an oligarchy, we're doomed to bleed away all of our fairly earned value.
Don't get me wrong - I hate our tax system here in the US. I think a VAT would be much fairer, as each person would pay taxes according to his or her spending level. No loopholes for the uber rich to slither through.