Taxes on cryptocurrency are an unfortunate reality in many countries. What features could be added to vaults, the Maidsafe browser, or even the Maidsafe network itself to help users handle taxes?
I know there are other laws in other countries, but I’m starting with the USA as they were the first to enact cryptocurrency tax laws and other countries are likely to look to the USA for inspiration for their own laws.
Being able to handle taxes more easily can help with coin adoption as people won’t be frightened of being unprepared when the year ends. It also might convince people to join the network as their taxes are easier here than with their old coin.
A quick USA tax overview
- Cryptocurrency is considered a property for tax reasons. It’s taxed sort of like stocks.
- The value of the currency is based on the prices used on exchanges for that currency.
- Mining/farming/staking is considered a business for tax reasons.
- Selling cryptocurrency is taxed.
- Using cryptocurrency to buy things is also taxed.
- Losses and business expenses are still calculated in when dealing with cryptocurrency.
- This is federal law. More from the IRS: https://www.irs.gov/pub/irs-drop/n-14-21.pdf
- A tax year is Jan 1st until December 31st.
Did I miss anything important in this short rundown or make any mistakes?
Ideas to help users with their taxes
I think the vault should have some features to help people know how much they earned. Vault features are saved locally in the vault and can be checked by the user at any time.
Each vault needs to track how much currency it generates if it generates some. This should be a running tally that cuts off on December 31st at midnight, PST. It keeps this running tally every year. The tallies from past years plus the current amount made are kept as long as the vault exists.
Each vault could tell a user how much their coins are worth. It would do this by looking at the value of the coin over several exchanges, averaging these values together, then applying them to their coins. If there is no direct USD-MAID conversion, it would need to be MAID-BTC-USD instead. This could be kept in the ledger for multiple years to help a user see how they are growing. It is only tallied when the user checks their ledger or when the year ends.
If it already isn’t in the works, a running ledger of coins in and out would be helpful. The ledger could also tally total coins in, total coins out, and if more came in than out. This might help people calculate gains/losses.
Current coins: 12,340
Coins earned Year to Date: 85
Value of earned coins: 223.53 USD
Price per coin: 2.629 USD
Total coins in Year to Date: 4,349
Total coins out Year to Date: 8,348
Net change of coins: -4,084
Coins earned: 43
Value of earned coins: 92.34 USD
Price per coin: 2.147 USD
Coins In: 5,458
Coins Out: 2,403
Coins held at year end: 8,293
Net change of coins: +3098
The Maidsafe Network could also help track a user’s coins.
An optional personal account could be created with no personal identifiers outside of an ID for your account. I am aware this lowers anonymity a little, but it may be a worthy tradeoff to help using the coin as a currency be more accessible to regular people.
This account would be stored on the network. The personal account could be accessed by apps on the Maidsafe network. It is not accessed via anything else. By having one standard account for the entire network to use people avoid fragmentation of their information. No more looking at 10 different accounts and doing a ton of math: it’s all in one place!
The account is used to track when you get a coin, spend a coin, or gift a coin. This is different from the vault itself as it only tracks things done over the Maidsafe network. For example, if someone makes an online store app the personal account would interact with the online store app to track how much was spent. This could double as a means of making receipts.
Apps could also generate similar accounts within themselves using this general account template to help with taxes. Using the online store app as an example, the app could generate an account for the shopkeeper where the shopkeeper can track all their sales, the price of inventory, the price of shipping, and any losses from lost/broken/defective goods all in one place.
Any other ideas that would help Maidsafe users be compliant with their local tax laws?
Better versions of these ideas?
I know I didn’t cover stuff done on exchanges or outside of the Maidsafe network. Unless an exchange is on the Maidsafe network (in which case it could use that network account I suggested) there’s not much Maidsafe can do to help that I can think of. Can you think of anything?
Please avoid tax evasion talk in this thread. This is a thread to help those who have to take care of their taxes and intends to stay as legal as possible. Thank you!