Bitcoin, Taxes & Statehood

bitcoin currency state taxation tax

Bitcoin: Stateless Currency

In our earlier post about the taxation of bitcoin, we pointed out the fact that bitcoin taxation brings up a number of potentially problematic, complicating issues. For one, we mentioned that there could be issues with bitcoin’s basic classification as “investment property” given that it is a digital currency. There could be many, many other issues presented by the taxation of bitcoin, some superficial and some fundamental. One of the most important – and most interesting – fundamental issues with bitcoin taxation is related to its status as a stateless currency. As discussed before, bitcoin is essentially a self-perpetuating currency system based on complex verification processes which are managed by bitcoin users; and because bitcoin verification processes are so difficult and its structure is so finely developed, there is no need for bitcoin to be managed by a central authority. What we have is a truly independent medium of exchange which is capable of operating freely outside and over traditional boundaries of nation and state.

But the stateless aspect of bitcoin brings up a critical question: given that taxation is essentially forcible compliance with the financial demands of a state, how does bitcoin factor into the taxation paradigm? Let’s put the matter this way: how can property be taxed if it’s derived from a system which is designed to avoid taxation? Bitcoin and the U.S. dollar are based on two totally dissimilar value systems, and simply retroactively applying preexisting tax laws to bitcoin fails to address this basic discrepancy. If bitcoin continues to rise in market value – and many reputable financial experts predict that this will happen – it seems likely that this fundamental issue will receive more and more attention. At some point, those who seek to tax (or otherwise control) bitcoin may be forced to ask the question: why are so many people flocking to this digital currency in the first place?

Historically, populations have depended on currency as a medium of exchange because currency allows large quantities of value to be shifted much more easily. And states have imposed taxes on their populations because they’ve had the means to do so, and also because states have had a hand in establishing the legitimacy of a currency. We have faith in the U.S. dollar because it comes with the imprimatur of the U.S. government; it is “secured” by its affiliation with the state. And of course the U.S. dollar and other currencies around the globe benefit from various efforts to ensure that any digital transfer of currency be guarded by the most advanced cryptographic processes available. But bitcoin is a system unto itself because it is originally based upon and perpetuates itself through its own highly sophisticated cryptographic verification system. It does not have the “legitimacy” of statehood because it has no need for it. It exists outside, above and around statehood, rather than coexisting side by side.

What if many of the issues associated with bitcoin are unsolvable because they’re not really meant to be solved? What if the fundamental issue with bitcoin is the fact that it’s not intended to fit into any existing state system, no matter how much force is used to make it otherwise?

Image credit: btckeychain

5 Apps Which Can Help if You Procrastinated on Your Taxes

Society is becoming technology based. Applications have been designed for mobile devices to make it easier to keep track of spending, donations, mileage and more. The apps are convenient to use.MobileApps

ItsDeductible Donation Tracker

If you make charitable donations to offset tax liabilities, this app is a big help. Users can track the amount of a donation, the organization’s name and keep track of itemized logs for filing purposes.

IRS2Go

With IRS2Go, users are able to view the status of a refund, view tax records and find tax preparers. IRS specific notifications can also be sent to your phone from the app. You are not able to file taxes from this app, though.

Expensify

Expensify is a good app for those that travel for business frequently. You are able to track traveled miles, meals and other business expenses. A photo of your receipts is all that is needed.

Bloomberg BNA Quick Tax Reference

The Bloomberg reference app helps users see tax schedules and rates with a simple search. The app has a built-in calculator and includes retroactive calculation technology to go back as far as 2011.

MileIQ

When you drive or fly regularly for business purposes, MileIQ helps keep track of the miles you have traveled. You are able to select business routes to automatically track mileage and automatically detect and track business travel.

It is ideal to make sure that the app you wish to use is available for the operating system on your phone. Some will send notifications to get your attention. Easy access to tax deduction information can make the filing process easier too.

Image credit: Sean MacEntee

Top Tax Software Programs

EfileTaxesAre you planning to do your own taxes this year? If so, you may want to look into using one of these two software programs. These programs arguably occupy the top two positions within the tax software market and are potentially highly useful for the self-filing taxpayer.

Turbo Tax

Turbo Tax is one of the most well-known tax software programs. They have a variety of features available to ensure that regardless of how simple or complex your tax situation is they can handle it. They also stand behind the motto that they can get you the largest tax refund possible. The best part is when you file with Turbo Tax, you don’t have to stay up to date with the tax laws because they will ask you a few simple questions and automatically pull all of the deductions and credits that you are eligible for.

H & R Block

H & R Block is known for their physical locations; however, they have tax software available for those who prefer to file their own returns. With H & R Block, you can still come into an office if you are stuck doing your taxes yourself and their packages come with phone support and audit protection. Usually, you have to pay extra for filing your state returns, but the ability to come into an office for help if you get stuck makes up for that.

Closing Thoughts

If you plan to file your own taxes this year, it is recommended that you use either Turbo Tax or H & R Block’s software to do so. You can be confident knowing that their software’s are secure and that your personal information is not going to be going into the wrong hands. Additionally, if by chance you happen to be audited by the IRS, you can know that they have your back.

Image credit: Got Credit

A New HTML Tag for Images!

Remember when browsing the web with your smartphone was painful? “Hey, what happened to my flash!?!” But, then, did you notice a few years ago, it suddenly wasn’t so painful anymore? Well, what happened?

The improvement was due in large part to the introduction of Responsive Web Design–an idea first put into practice by web designer Ethan Marcotte. You can read Marcotte’s original ideas on Responsive Web Design here.

The idea is that the Web, unlike a building’s architecture, for example, is flexible. Instead of developing entirely different sites for mobile viewing, designers could take advantage of this flexibility, and design sites that respond to how they are being viewed, whether on a desktop, an iPhone or a tablet.

Ideas like Marcotte’s are important. First of all, it made browsing the Web with your phone easier, practical and, well, not painful. It also led to new ways of thinking about the issues web designers face in terms of making the user experience more agreeable.

A recent issue web developers were facing was how to speed up the download of pictures on mobile devices. The solution innovated by a team of developers, some of whom previously worked with Marcotte, is a new HTML tag known as Picture. This great article from Ars Technica explains the long, winding drama the developers faced getting the Picture element introduced into the markup language. Who knew HTML could be so exciting?

The article also explains how the Picture element will work:

“When the browser encounters a Picture element, it first evaluates any rules that the Web developer might specify …  Then, after evaluating the various rules, the browser picks the best image based on its own criteria.”

So, in this case, the word “best” is relative to browser settings:

“For example, future browsers might offer an option to stop high-res images from loading over 3G, regardless of what any Picture element on the page might say. Once the browser knows which image is the best choice, it actually loads and displays that image in a good old img element.”

The solution goes back to the root of the problem which is how pictures are loaded on sites. This is from the Opera’s developer site:

“But, even though RWD [Responsive Web Design] sites looked different on each device, underneath, most of them continued to download the same resources for all devices. And since images comprised the major part of the bytes that websites were downloading, the developer community started to look into possible solutions to avoid this waste.”

In the end, the Picture tag was their solution.

Thanks for reading our weekly blog post! You can expect more from us in the upcoming weeks! Remember we are Seattle CPAs and Bellevue CPAs! Get in touch!

 

Controversial or Just Not Cool Yet?

We recently discovered an article from Fast Company entitled, “The Science of Cool: What Makes One Product Design Cool And Not Another?” It’s a great read that looks into a fairly interesting question posed by two marketing scholars, Caleb Warren and Margaret C. Campbell. The question, as you may have guessed, is what is cool or what makes something cool and something else not cool?

You can read Warren and Campbell’s jstor article here.

When marketers like Warren and Campbell ask these kinds of questions, they’re really attempting to peer into human psychology so the possibilities and conjectures based on their findings are more or less endless depending on your perspective. In the end, Warren and Campbell kind of reaffirm what we laypeople all more or less already believe about coolness which is that it it “doesn’t last.”

The Fonz, for reasons more or less unknown in subsequent decades, was considered very cool in the mid-70’s.

This quote from Warren sums it up best in the article’s final paragraph:

“If you’re really doing something right, the chances are the coolness isn’t going to last,” Warren says. “Because you’re going to shift what is the norm.”

But outside of always pushing the envelope or “diverging from the norm,” what are some of the other traits that define coolness in product design? Here are a couple the article brushes on:

1.) Cool is a social perception. Nothing is inherently cool.

2.) Cool is relative or based on context. The example the article gives is that a t-shirt from H&M is cooler than a t-shirt from Wal-Mart and certain t-shirts in H&M may seem cooler than others.

Something else the article points out is that coolness is a function of a product’s conventionality as well as its unconventionality:

“Being cool requires a very delicate balance of doing something that shows that you go your own way and do your own thing, but you do it in a way that is socially desirable or at least acceptable,” explains Warren.

You can take this conjecture a bit further, as Warren and Campbell do, and discuss when something is not cool. For example, when a product seems to push the envelope too far past what is considered socially acceptable it becomes “controversial.” This does not mean that extreme products do not have the potential to be cool as society catches up with them, but it does mean that extreme products when judged by contemporary standards are too outside of the norm to be considered cool.

Henry Winkler’s Happy Days character Arthur Fonzarelli is a good illustration of this point. While no one remembers exactly why the Fonz was so cool back in the ’70’s, it may have been due to the fact that he was only playing cool. The Fonz was a greaser–a hoodlum–but not really. He was a 1970’s sitcom version of a greaser–a kinder, gentler and subsequently cooler 1970’s version of what was once too extreme to be considered cool two decades prior. That, or maybe Western culture was simply mistaking irony with nostalgia. Nowadays, that nostalgia has been unabashedly replaced with irony. RE: Henry Winkler in Arrested Development.

When you hear these explanations of concepts such as “coolness,” they always seem to have been on the tip of your tongue, but someone else found a way to articulate them first. In a way, that’s true. When we sense that something is cool, we’re processing implicitly and more or less effortlessly a complex concept experts and scholars spend a great deal of time attempting to explain.

In that way, and this is another of those ideas we all sort of take for granted, the consumer, and not the marketers or the designers, is really the best judge of what is cool.

 

 

 

 

 

 

Google’s Digital Sundial—Because We’re Human Beings

One of the abiding traits of humanity since recorded history is, well, our tendency to make things sometimes for practical reasons and, sometimes if we’re being honest, for no reason. Map making is a part of that impulse and in its own unique way combines both the practical and the superfluous. We use maps for all kinds of practical things but we also like them. They shrink vast distances down to a manageable size. They open up the imagination. They’re fun. We enjoy a subjective relationship with them which makes a lot of sense considering just how subjective map-making is.

The Euro-centric, North oriented map that seems so practical and intuitive to us nowadays could just as easily look like this:

Upsidedown Map Of The World--Optimized

As this article from The Atlantic points out, “[Maps] are imperfect tools crafted by imperfect human beings.” This means that things like politics, cultural norms, religion, etc. will have an influence. It also means that there is a personal element to the map faces we look at. Google Maps, probably the most comprehensive, simultaneously detailed and flat out useful series of maps the world has ever seen is no different.

This link will take you to 2 15th st. nw which as it happens is the address of the Washington Monument in Washington, D. C. In case your knowledge of American monuments is fuzzy, the Washington Monument is a 500 ft. tall obelisk which means in a certain slant of digital light it is a perfect place for Google engineers to insert a sundial Easter egg. At all times of the day, you can tell time by the direction the shadow falls–“no, srsly.”

Well, that’s it for us this week! Check back here next week for more from Huddleston Tax CPAs!

 

New gTLDs!

Update 5/2/14: This link explains the introduction of temporary domains. It works this way–A couple marries and purchases a domain at .wed to celebrate their union. After the wedding, interest in that event will drop off a great deal, and its site will go “unused and unvisited.” However, to avoid that kind of stagnation, the owners of .wed have decided to jack up prices in the third year from less than a hundred dollars to tens of thousands of dollars effectively vacating that domain for new users to buy and own.

If you’re curious, the owner of .wed is this company, Atgron. Its CEO and the apparent progenitor of this new idea is Adrienne Mcadory, a former IT project manager at the Pentagon. She was interviewed in the NPR podcast we based our post on. You can listen to the podcast here.

what-is-a-gtld

 

Do you own a website? If so, the chances are high you’re  using a domain address that ends in .com which makes sense as its the most widely used and easily recognized domain ending in use today. Although, due to ICANN’s expansion of new generic top level domain addresses or gTLDs there is a chance that could change. Planet Money’s new episode, “The Wild West of the Internet,” does a good job explaining the history of .com, and what the introduction of these new domain names means for its future and the future of the whole Internet.

ICANN, which stands for the Internet Corporation for Assigned Names and Numbers, is a non-profit organization based in Los Angeles, CA, and is responsible for introducing all of the new gTLDs that include such endings as .ninja, .kim, and .link. (Actually, here’s ICANN’s list of new domains.)

One of the benefits of new domains being introduced is that it opens up space for possible new domains and could lead to cleaner and shorter web addresses which helps out both businesses and consumers.

If you’re interested in buying one of these new domains, it’s not totally out of the question. But most of them will inevitably be owned by large corporations. If you are the owner of one of these domains, however, you can look forward to setting all of the rules for the way it will be used including the fee for the cost of using it.

Of course, as Planet Money points out, this isn’t the first time new domains have been introduced. ICANN introduced a handful of new domain names around the turn of the century that were bought up by businesses interested mostly in preventing their competitors from owning them and not necessarily expanding them into viable online locations.

What do you think about this latest development in web domain names? Good, bad, doesn’t matter? Let us know in the comments section! Have a nice week!

 

Bitcoin is not real yet

Update 3/25/14: The IRS has updated its rulebook to include a method for taxing “virtual currency.” As we noted, this was the assumed course of action many thought the IRS would follow, and they have. What this means exactly is still speculation, but this Bloomberg article on taxing Bitcoin as capital gains does a good job presenting the pros and cons of this most recent development.

The genesis for this post was pretty simple. It began with a two-fold question: Do you pay tax on Bitcoin, and if so how? We can answer the first part right away: No, you do not, at least not yet. This leaves the second part up for discussion.

We don’t have an opinion on this issue so you shouldn’t view this post as a tax professional commenting on the future taxability of Bitcoin. Instead, we’ve put together a few media viewpoints for educational purposes. Remember, only death and taxes are certain—consequently, everything else is relative.

Actually, most of the questions regarding Bitcoin have to do with its longevity and security. In February, about 70% of worldwide Bitcoin transactions on the Mt. Gox exchange site were compromised by hackers and what was the equivalent of about $450 million was stolen. Back in January, in an article entitled “Taxing Bitcoin: IRS Review has Big Implications for Investors in Virtual Currency,” Forbes magazine described Bitcoin as a “sandbox for speculators” and a “marketing fad.” In light of this, you can see where questions about Bitcoin tax are perhaps premature. Bitcoin is not at a viable stage in its development to need to be taxed.

Regardless, there is a lot of interest in ways to turn a profit with Bitcoin,which we suppose means Forbes is absolutely correct in their “sandbox for speculators” assumption. A few preliminary ideas have been brought out including the Winklevoss’s idea of creating a fund that would trade Bitcoin. That kind of emphasis from investors certainly has the IRS and tax professionals considering the possibility of taxation as well as strategies to do so.

From the same Forbes article: “If Bitcoin is a capital asset … long-term gains and losses would be subject to preferential capital gains rates (23.8 percent for high-income taxpayers). However, losses of more than $3,000 could only be used to offset other gains and not ordinary income. Separate rules may apply to professional traders.”

As it stands, there’s our answer. Presently, Bitcoin when it will be taxed will be taxed as a capital asset. That would stand at least until Bitcoin became more viable in the eyes of not just the finance community, but first and foremost found use as real currency. That could happen, but who knows when?

There are Bitcoin ATMs, that work as a sort of Bitcoin depository, so maybe sooner rather than later?

Bitcoin, as a product of the Internet, is new and exciting and unregulated. There is a lot more to be said about it, and it seems like every week there is a new development. If you find Bitcoin an interesting topic, post about it in the comments. We want to hear what you think.

Give us a call at 425-483-6600, and we’ll do your taxes!

 

Online accounting software is changing

We are an accounting firm focused on assisting small businesses. We do taxes, payroll and books along with business valuations. We provide a lot of great services, and we know it is a necessity to keep up with accounting technology to simplify what we do to provide better services for our clients. So today let’s get big picture, and take a look at one of the more recent developments in accounting software. It started with Quickbooks, but it is certainly expanding. Hint: Get your head out of the clouds.

That’s right we’re talking about cloud accounting. The cloud platform, while certainly nothing new, has a lot going for it including the capacity to allow accountants to work and receive information from their clients in real time. There are a few providers out there of this kind of software, but as we mentioned, Quickbooks is probably the best known and most widely used. (In fact, our company offers Quickbooks consultations, and if you are looking to use Quickbooks in your home and/or office, call us. We recommend it first and foremost.) Nowadays, however, you can’t mention cloud accounting services without mentioning Xero. Xero is a software-as-a-service company that provides a new more user-friendly and design oriented spin on the old cloud based accounting software.

Xero actually has a lot to offer. Its services include billing and invoices, a wide range of accounting tools for the professionals, and a few other features. Of course, none of these are unique to Xero. You can use all of the same services with Quickbooks or any of the other online accounting software programs out there. The idea, of course, is that Xero is opening up the  accounting software niche by improving on Quickbooks services and presenting them in a unique, user-oriented fashion. It is also investing hundreds of millions of dollars in its product to compete with Quickbooks.

The result is not only convenience with a wider array of options but also ease of use. Certainly, many proponents of Xero will agree that is what sets them apart.

Thanks for reading our update on cloud accounting. Before you jump ship from Quickbooks to Xero, be sure to do your research and consult with an accounting firm like ours. The important thing to remember is that without the guidance of a tax professional the type of software you use is really just a secondary concern.

 

Huddleston Tax CPAs of Seattle & Bellevue
Certified Public Accountants Focused on Small Business

(800) 376-1785
40 Lake Bellevue Suite 100, Bellevue, WA 98005

Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching, Quickbooks consulting, bookkeeping, payroll and business valuation services for small business. We serve Seattle, Bellevue, Redmond, Tacoma, Everett, Kent, Kirkland, Bothell, Lynnwood, Mill Creek, Shoreline, Kenmore, Lake Forest Park, Mountlake Terrace, Renton, Tukwila, Federal Way, Burien, Seatac, Mercer Island, West Seattle, Auburn, Snohomish and Mukilteo. We have a few meeting locations. Call to meet John Huddleston, J.D., LL.M., CPA, Tawni Berg, CPA, Jennifer Zhou, CPA, Jessica Chisholm, CPA or Chuck McClure, CPA. Member WSCPA.