The prevailing bearish run has everyone worried! It has prompted U.S. states to give another thought to tax payments. Should they allow payments via cryptocurrencies, or not?
They refer to people making payments in cash. The taxation laws cover income gained from the Federal, state, foreign, and local systems. The payments also indicate all manner of assessments. They mean the imposition of additions, interests, or penalties, related to such amounts. The borrower and the consolidated subsidiaries pay them or are expected to pay them. Alternatively, someone may act as an intermediary for the borrower and the subsidiaries. Start your trading journey by using a reputable trading Platform.
However, other states are only thinking. In contrast, Colorado and Utah are taking bold actions! They believe in letting people pay taxes in digital currencies.
Samuel Armes is the President of the Florida Blockchain Business Association. He believes that permitting tax payments in cryptos would enhance the states’ reputations. People would appreciate their crypto-friendliness. Furthermore, they would lure modern technologies towards them.
Regardless, most U.S. states have shelved the idea of permitting crypto tax payments. After all, the crash of digital assets has resulted in humongous losses. They amount to hundreds of billions of U.S. dollars.
Colorado and Utah
Amid this chaos, Colorado and Utah stand firm! They are going ahead with their own programs. They are the outliers. Individuals may use Bitcoin, Dogecoin, or Ethereum, to pay their taxes. So many businesses.
Their revenue departments are engaged in fine-tuning the details. Therefore, the implementation may have to wait for a few months. Then again, there are some logistic hurdles to be cleared, too.
Utah has come up with a novel law. The law ensures that even local and state units of the government accept tax payments in virtual currencies. The new tax payment law will come into effect from Jan 1, 2023.
Suppose, an individual/business makes a tax payment. The receivers will ensure the conversion of cryptos into U.S. dollars. Of course, they will not be able to do it by themselves. Therefore, a third-party payment gateway will help. The converted amount will reach the state’s coffers.
Colorado is keen to set up a similar system. Therefore, a third-party payment gateway will be in evidence. The state is also considering the incorporation of credit cards. Other types of payments may enter the picture too. Colorado will launch the new legislation in the next legislative season.
Benefits of Paying in Cryptos
A crypto payment is permanent. It is irreversible. The transferer cannot get it back in any way. Only the receiver has the power to refund the payment. Therefore, the process will teach taxpayers to be careful in their calculations!
Then again, digital currency payments are safer. Credit cards and debit cards do not promise equal safety. Credit cards, specifically, are prone to fraud. They were evident in both 2019 and 2020. It is because they need verification, rendering personal details exposed. This does not happen with cryptocurrencies.
Similarly, there is no need for data to be stored in centralized hubs, with digital currencies. Instead, the information goes into crypto wallets. However, it is required for credit cards. Therefore, breaches of data are common. Above all, crypto transactions are verified and recorded on a blockchain general ledger. It makes identity theft impossible.
Opinions of Critics
They do not advise the initiation of crypto tax payments. It is because market capitalization has fallen drastically. Within a span of six months, the figure of $3 trillion, has moved to $900 billion.
The Global Financial Markets Center belongs to Duke University. Its Executive Director, Lee Reiners, has a strong opinion about this. He believes that this kind of volatility has led to the loss of interest in cryptocurrencies. Therefore, permitting crypto tax payments is not going to benefit the U.S. States.
Betty Yee agrees with him. She is California’s State Controller. She believes that cryptocurrencies are still in an immature stage. Therefore, volatility may be expected. This should make government agencies rethink integrating it.
Omri Marian, a professor at the Irvine School of Law, University of California, agrees. She believes that taxpayers will be burdened with ‘compliance’. Tax authorities will have to contend with new administration laws and enforce them.