According to an official announcement on Thursday, a mining and hosting firm Compass Mining has entered into a partnership with IRA provider Choice by Kingdom Trust to help Bitcoin users in the United States mine directly to their IRAs without paying taxes.
The U.S. rules state income is the only taxable source of funds for many who file returns. Crypto users who purchase tokens may be required to declare the holdings in their tax returns, but might not need to pay the government anything unless they opt to mine the tokens.
Similarly, revenue from mining crypto is considered income, which miners have to pay taxes for generating blocks and liquidating the coins.
Bitcoin Users Can Avoid Tax Obligations by Sending Proceeds to IRAs
Both of the cryptocurrency companies introduced their product to allow miners to avoid taxes on mining revenue. Depending on the type of IRA, the savings will be temporary or permanent.
To do that, the Choice IRA holders are required to own enough funds to buy mining hardware and revenue should be sent to the account after purchasing and coming online.
Both companies called their product a “tax-advantaged” or “tax-efficient” IRA.
Crypto Mining Revenue Is Considered as Part of Taxable Income by the IRS
In 2014, the IRS declared mining activities would result in taxable gross income and labeled newly generated blocks. This can put existing-and-coming mining firms in the U.S. At a disadvantage if they do not have enough capital to cover mined tokens.
“There is a strain of thinking in America that not paying taxes is smart,” said Jesse Eisinger, a journalist at ProPublica. “The federal government needs to be funded for basic services to keep us safe and healthy and keep society functioning. The government depends on taxes.”
Many wealthy people in the United States use strategies to limit tax liability. ProPublica reported last month that Peter Thiel, co-founder of PayPal had used a Roth IRA, an account generally not taxed, to invest $2,000 for over two decades ago to turn it into a $5 billion fund.
