Josh Jarrett, a fitness coach and part-time cryptocurrency investor, has filed a lawsuit against the U.S. Internal Revenue Service (IRS) over its tax policy for staking rewards.
In an Oct. 10 post about I shared that it wasn’t.
Jarrett refused the refund at the time, but said he would sue federal authorities again over the 2020 staking rewards.
The new legal battle seeks clarity on how the IRS treats staking rewards and aims to prevent similar problems from occurring in the future.
His latest endeavor is backed by Coin Center, a cryptocurrency advocacy group based in Washington, DC.
Discussion on staking rewards
According to an Oct. 10 court filing, Jarrett argues that taxing staking rewards as income at the time of creation would lead to unnecessary complexity and overtaxation for individuals involved in staking. There is.
Crypto staking allows token holders to act as validators in Proof of Stake (PoS) networks. By locking tokens in staking contracts, participants earn digital assets to support the blockchain.
Jarrett argues that tokens generated through staking should be treated as assets and taxed only when sold.
He said:
“Staking rewards are new wealth, not income. Just as the IRS doesn’t tax farmers when their crops grow, or miners when they find gold or silver. There should be no tax on tokens when they are created; the law should only apply when they are sold.”
Cryptocurrency advocacy group Coin Center supports this view. The group argued that the IRS’s stance has resulted in overtaxation, compliance issues, and stifling innovation.
According to the company, the block reward that validators receive when they add a new block to the blockchain is a new cryptocurrency token. Therefore, the IRS’s current policy is that these tokens are illegally taxed as income when they are created. However, since block rewards represent new assets, taxes only apply when they are sold.
Coin Center emphasized that federal tax laws and government agencies’ interpretations of these laws could significantly impede the use of digital assets and permissionless technologies in the United States.
Posts mentioned in this article: Tezos, United States, Law, Taxes
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