Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.
Sign up to join this community
A few months age the SEC has regulated bitcoin as a commodity. Quick googling tells me than commodity wages are exempt from taxes and it looks like if a company can fully operate in bitcoin particularly, it has to pay no taxes according to the current law.
Does it really woke like this? How is Bitcoin operation taxable as a commodity by the current US law?
Often times, people "operating in bitcoin" are criminals. The whole point of Bitcoin is to evade taxes and detection while committing financial crimes.
You're describing one of these crimes. You're making a frivolous claim ("commodity wages are exempt from taxes"), and then chain another frivolous claim ("a company operating in bitcoin ... has to pay no taxes") to draw a conclusion that bitcoin is not taxable.
Clearly, that conclusion is false.
As with many other frivolous tax evasion schemes, it's based on misunderstanding and/or misrepresentation of the tax law.
What the tax law does say is that if an employee is given products of their labor instead of cash (for their use) - that is not subject to payroll taxes (still subject to income tax though). However, the IRS is very clear: if the substance of the exchange is cash payment then that doesn't hold. You can't just "get paid" in bitcoin instead of US dollars and miraculously not pay any taxes. See the IRS Publication 51:
Noncash wages (including commodity wages).
Noncash wages include food, lodging, clothing, transportation passes, farm products, or other goods or commodities. Noncash wages paid to farmworkers, including commodity wages, aren't subject to social security taxes, Medicare taxes, or federal income tax withholding. However, you and your employee can agree to have federal income tax withheld on noncash wages.
Noncash wages, including commodity wages, are treated as cash wages if the substance of the transaction is a cash payment. Noncash wages treated as cash wages are subject to social security taxes, Medicare taxes, and federal income tax withholding.
Report the value of noncash wages in box 1 of Form W-2 together with cash wages. Noncash wages for farmwork are subject to federal income tax unless a specific exclusion applies. Don't show noncash wages in box 3 or 5 of Form W-2 (unless the substance of the transaction is a cash payment and they’re being treated as cash wages).
Commodity payments are generally used in agriculture where the employees also get the farm products and/or accommodations as part of their compensation. I don't see how that would be applicable to bitcoin - are you eating bitcoin for breakfast? Sleeping in your bitcoin?
