I’m a full time W2 employee for a crypto/Web3 company. We all receive our salaries in Bitcoin - there is no other option; it’s a recruiting tool to attract talent that buys into the ethos of the future of finance. I feel ashamed to admit that I did NOT know that my Bitcoin salary actually gets DOUBLE taxed - until my accountant just sent me a 5-figure tax bill. I get taxed: 1) On payday (all state and federal taxes taken out, I had planned for this) And then again: 2) When I cash it out into fiat to pay my bills (taxed as short term capital gains). I feel dumb that I did not know this and now have burdened my family with a high tax bill. I also feel like I just got a huge paycut. Not everyone can just get paid in Bitcoin and HODL. We have mortgages, daycare, groceries to fund. So think twice before being excited to accept 100% of your salary in Bitcoin, like I was. A bitter lesson to learn. Better to get paid in fiat and then just put as much as you want into crypto instead. *** With that said, if you are a crypto-fluent accountant, or know one you can refer, PM me as I need your help and am willing to pay! **** Otherwise I’ll just move to Portugal where theres 0% tax on your crypto lol TC: 120
This doesn't make sense. The cost basis should be whatever the price of BTC is whenever you receive it. Meaning you'd get taxed for selling higher than it was when you got paid it.
This is a relief to hear my suspicions confirmed and maybe my accountant was wrong then. Something with FIFO/LIFO. I’m filing an extension to get this sorted but still have to pay what they think I owe anyway and then claw it back. What a mess and thank your for this keen insight.
Definitely go get a 2nd opinion from another accountant, preferably one that's knowledgeable in crypto.
Sounds like company script. History repeats? https://en.m.wikipedia.org/wiki/Company_scrip
Never heard of this and now totally gonna do a deep dive!
What a cool thing to learn and such an appropriate parallel to the web3 economy
If you get paid on crypto and if there are merchants that accept crypto, how do taxes work if you spend crpyto to that merchant? Do you still pay the capital gains tax?
Unfortunately yes. That crypto is recorded on the blockchain as being sent to the merchant’s Wallet, or “sold” to that merchant - triggering a short term capital gains tax. I was using Bitrefill.com gift cards to pay for life in crypto on Amazon, Whole Foods, Home Depot, etc, but it’s very costly from a tax standpoint.
I see. What about for the case when you buy other crypto/stock/real estate with crypto? Does the same law apply?
tc 120 so its not paid in crypto, its converted to crypto usd salary -> market buy -> crypto deposited which is vastly different from paid with crypto btc salary -> deposited but to the topic: your capital gains are taxes for $current_strike - $received_strike. Make sure that $received_strike is not zero in your tax form bc then you will be double taxes
Oh yes hasn’t thought about it like that but that is accurate. I used a crypto tax accounting software and now as going to pour over all the transactions to make sure no zeros, thanks for thinking of this!
If you’re getting taxed a second time, it’s because you gained on Bitcoin. Dollar is on fire. GGs BTC
why don’t you put Bitcoin as a collateral and borrow against it? Just as much as you need. Better than paying tax most likely
He still has to pay tax when he received the crypto. The percent loan amount he can get from his crypto can be much less (e.g., you can only get $30 loan from $100 worth of crypto as collateral)
Or maybe stop being arrogant and trying to disrupt the world order when you know nothing about macroeconomics
cant u choose a stablecoin?
This is similar to how people get paid in RSUs.
Yes, only their entire salary isn't RSU. Having to potentially trigger capital gains tax on every use would be a nightmare to handle. You have to calculate ahead of time when to liquidate for each spend.
You only get taxed on gains right?
He gets taxed as the income too. If he sells it right away the cost basis should be close to canceling our capital gains, though. The worst scenario would be getting taxed for $100k worth of crypto that ends up worth only 50% a year after. You still have to pay taxes according to when you receive the crypto.