The Battle to Change How the IRS Taxes Mining and Staking

The Breakdown

Blockworks

Investing, Business

4.8 • 806 Ratings

🗓️ 4 February 2022

⏱️ 14 minutes

🔗️ Recording | iTunes | RSS

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Summary

This episode is sponsored by Nexo, Arculus and FTX US. Two Tezos stakers sued the IRS to get back taxes paid on property they say they created through staking. The IRS offered to pay them back but didn’t commit to clear policy guidance. The stakers will now continue the suit, and they’re being backed by the Proof of Stake Alliance. NLW also examines a new bill that would eliminate taxes on bitcoin transactions with capital gains under $200. - Nexo is a powerful, all-in-one crypto platform where you can securely store your crypto. Invest, borrow, exchange and earn up to 18% APR on Bitcoin and 20+ other top coins. Insured for $375M. Audited in real-time by Armanino. Rated excellent on Trustpilot. Get started today at nexo.io. - Arculus™ is the next-gen cold storage wallet for your crypto. The sleek, metal Arculus Key™ Card authenticates with the Arculus Wallet™ App, providing a simpler, safer, and more secure solution to store, send, receive, buy, and swap your crypto. Buy now at getarculus.com. - FTX US is the safe, regulated way to buy bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today. - Enjoying this content? SUBSCRIBE to the Podcast Apple: https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M= Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Time” by OBOY. Image credit: Constantine Johnny/Moment/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

Transcript

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0:00.0	Welcome back to The Breakdown with me, NLW.
0:09.2	It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world.
0:15.0	The breakdown is sponsored by nexo.io, Arculus, and FTX, and produced and distributed by CoinDesk.
0:22.6	What's going on, guys? It is Thursday, February 3rd, and today we are talking about the
0:27.5	emerging battle to change how the IRS taxes mining and staking. First, if you were enjoying
0:34.2	the breakdown, please go subscribe to the show, give it a rating,
0:37.9	give it a review, or if you want to get deeper into the conversation, come join us on the
0:42.6	Breakers Discord. You can find a link in the show notes, or you can go to bit.ly slash breakdown
0:47.8	pod. And as always, a quick disclosure, in addition to them being a sponsor of the show, I also
0:54.0	work with FTX.
0:55.8	So, last night, Blockworks broke what seemed like a huge story. Their tweet said,
1:01.1	Breaking, IRS will not tax unsold-staked crypto as income. However, the piece title was in
1:08.1	win for crypto-stakers. IRS offers refund on untraded token rewards. So
1:13.2	there are really two quite different things going on here. One title is a specific case,
1:18.4	the IRS offering a refund for a specific consumer. The other is a precedent. The IRS will not
1:24.0	going forward tax unsold stake crypto. So let's dig into the reality of what
1:29.1	actually happened. For tax year 2019, Joshua and Jessica Jarrett paid $3,293 of income tax
1:37.9	for the receipt of 8,876 Tezos tokens that they had earned from staking. In 2020, Joshua Jarrett asked the IRS to return
1:46.6	the taxes he paid, arguing that the tokens were not income, but rather, quote-unquote, created
1:51.1	property. When the IRS didn't respond, he filed a lawsuit in May 2021 with the U.S. District
1:58.0	Court for the Middle District of Tennessee. The lawsuit was funded in part by
2:01.8	the Proof of Stake Alliance. In December of 2021, attorneys for the IRS wrote to Josh and Jessica's
	...

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