Will Couple Vs. IRS win? Defi Taxes NFTs Taxes Staking Taxes and more

In 2020, about four US representatives wrote to the IRS in their bid to get some clarity about tax payments around cryptocurrencies.

Reportedly, a Nashville couple paid their taxes on their unredeemed rewards from what they staked on the Tezos blockchain. Eventually, the IRS offered to refund to the Nashville couple; however, the couple refused the refund in December 2021.

They felt a trial may help establish a precedent for taxes involved with staking digital assets.  The taxpayer’s decision in not accepting the refund is expected to force the IRS to take a more concrete position, thus setting a precedent for future tax payers who might be staking.

A bench trial is set for March 2023 and until the case gets settled after discovery in mid-March, the current refund activity by the IRS cannot become a binding precedent.

More numbers of people are beginning to amend their previous tax returns related to staking income.

This event has left several people contemplating on several other things.

thereadguy. eth shared: The IRS spent 60 seconds with Defi and decided no taxes.

Community Response:  DeFi is an umbrella term for a variety of different financial apps and services. The IRS hasn’t yet given guidance on DeFi taxes – but that doesn’t mean you won’t pay tax. Your crypto will be taxed under Income Tax or Capital Gains Tax – depending on the transaction.

Some of them have to state that we need to be aware that this was not a decision BY the IRS. It was a decision AGAINST the IRS by a court. If it was left up to them, they would be taxing staking rewards as income.

There are lot of complex things to look at like trying multiple wallets, multiple blockchains, bridging assets across chains, using Liquidity Providing farms with airdrops, crypto lending, wrapped coins, sending from multiple exchanges, with some staking, bribes, etc and lot more.

What will the IRS do with someone on 5 different chains, hundreds of coins, daily interest from 20 different farms, staking, and moving across chains and different exchanges, with mostly, peer to peer defi transactions and daily harvesting? No product comes close to handling complex Defi farming. Defi Farming is complex and staking details even more.

At present, there is no system in the world that can determine the basis of transferred assets, which will always need to be manual entry, “claiming coins to/from pools and rewards” which will also need to be manually classified for each transaction.  There are no shortcuts for these.

They realized most people are losing money. There will be too many deductions and the IRS will likely lose money.

And, they will have to look at ETH gas fees and eventually say “pack it up boys, there are no taxable gains”.

There is no clue about what the IRS said about NFTS? People are skeptical stating, they can’t even wrap their heads around crypto.  There is no way they have an answer for NFT’s.

They are still trying to figure out how to tax people on PayPal, Cashapp, and Venmo. They aren’t ready for crypto.

Just imagine a tax auditor trying to figure out every “flip and loss in nft” throwing up hands and just saying never mind.

Way too much work to calculate and track it all. You can’t track private wallets and many organizations are built around privacy. The whole thing is far too complex to get that 50-bucks they want.

Wait does this mean I don’t have to pay taxes on my NFT sales until I cash it out of the currency?

God, I wish, but I don’t think so. I bought 500+ NFTs in 2021 and have NO CLUE what my cost basis is for ~20 different types of coins.

I made about 530 worth of ETH after splitting my sales with my partner and paying gas. Not enough to need an accountant but enough to be annoying,

Meanwhile, they should be building a best-in-class tax tracking software. Plug and play. Then, again they don’t have enough warm bodies there to answer the phones let alone build something.

Well, if you farm with stable coin then they are already doing a slow rug.

Ultimately, will the couple taking on IRS head-on and wins?

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