On legal/tax perspective for payouts

A point I brought up on Discord,

So as a pipe cleaning exercise, I’m thinking of going through the cash-out process for my current payout. Though since it’s pipe cleaning. I’m wondering what the right way would be to approach this from a tax perspective.

I had a similar talk about crypto currencies with my accountant. What type of taxes applied and whether it would somehow involve my freelance status. Their argument was, though you’re a developer, you’re not in the crypto business so you can treat it as you would any private asset. Here though, it’s not an asset but more like a service. And I’m definitely expected to know what I’m doing as I’m in that business as a freelancer.

For small amounts I don’t think it matters, everyone does a bit of “private work” off the books for friends and family, doesn’t matter if it’s related to their profession. But if it reaches the scale where that generates payouts approaching paycheck levels, I think it would be an issue.

Would the open collective foundation already distinguish it for us as not being a professional service, but compensation for doing something for the foundation? :thinking:

Same there though. At what point would that trigger similar problems though where the tax service would argue: look these people are basically employees so you’re avoiding taxes by not treating them as such. I’d wager the big names on open collective, like webpack, have thought this through already. And open collective themselves may know. Would be good to figure that out as well. Would be a nice to have problem in the mid term :smile:

Linked by @decentralion

Quoting some information from the open collective link:

If you are filling invoices for more than $600 USD per year to a Collective with a Fiscal Host in the US (receipt reimbursements don’t count toward the $600 limit, only invoices), you will need to send them a from W9 (for US persons) or W8-BEN/E (for non-US persons). The fiscal host admin should contact you if you are required to submit a form.

For tax purposes, you will likely be treated as an independent contractor and you will be issued a 1099 if your earnings exceed $600. Here’s a good explanation of how W-9s work for independent contractors, and there’s more info on what a 1099 is here.

If you don’t meet the $600 threshold, simply report your earnings as miscellaneous self-employment income when you file your taxes.

I would definitely expect to pay income taxes on any earnings from the CredSperiment.

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  • I think crypto IRAs are now a thing too and they have awesome benefits
  • if mana/cred depreciates in value or disappears entirely that could have much different tax implications than if there’s an inflationary system (depends on your jurisdiction! do your own research! - search “demurrage” in this post)

TBH I have no idea though so consult with tax professional in your local jurisdiction (duh)

I think Uber is still getting away with this actually, so… north of 40B?

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@burrrata would you mind editing your post to link to references (both the crypto IRAs and the Tezos analysis)

Added what I could find, but tbh I haven’t looked into it that much. If anyone else does look into it, however, would be very curious to learn about what kinds of token mechanisms would be tax efficient/friendly (and less confusing/stressful for users)

Well frankly, I’m not trying to optimize for paying the least amount of taxes. On a theoretical level, I’m a proponent of taxation, setting aside the fairness debate for a moment. So I’m concerned with doing it properly, over getting away with the least amount.

The discussion in CredSperiment: Week 1 Payouts however, about not tying mana to fixed $ rates may effectively turn mana into a token though. And like crypto currencies may need to be considered as assets as well until cashed out.

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