First Website Improvements Released!

[pavvappav]

So far our plan is not to issue the forms to international customers. While that might change if we hear otherwise, I haven't been advised that international customers are affected.

Understood. I included the links to IRS regulations to cite my sources. With penalties for failing to report income paid to independent contractors upwards of $250 per incident/account, I'm certain that Prohashing is going to make sure everything is on the level.

Customers who locate mining equipment in the United States will have to receive a 1099 form. Customers who have no connection with the United States - who live elsewhere and who have their miners elsewhere - are not affected.

Steve, your paying non-residents similarly as you are paying residents. You have classified residents as contract employees, hence the 1099-MISC.
Because the person is a non-resident does not exempt them from reporting requirements. In-fact, you may be legally required to perform withholding of taxes for income paid to non-residents, and report that income and withholding via 1042-S form (https://www.irs.gov/pub/irs-pdf/f1040es.pdf).

The requirement is that Every withholding agent or intermediary, whether U.S. or foreign, who has control, receipt, custody, disposal or payment of any fixed or determinable, annual or periodic U.S. source income over foreign persons, must file these forms with the IRS. For example, employers that employ non-resident aliens (such as foreign workers or foreign students) would need to file a 1042-S Form with the IRS for every non-resident alien they employ and also send a (completed) copy of that form to the non-resident alien they employ.[2]


Refer to https://www.irs.gov/individuals/interna ... -must-file. The page also lists exemptions for who does not need to file for payments made to Non Resident Aliens (NRAs).

It doesn't matter where their miner is located -- it matters where the transaction takes place. I presume you are issuing the payments from a server located within the United States.

[jimbo207]

pavvappav, not sure how youre missing the fact that Prohashing does not employ us.

[pavvappav]

pavvappav, not sure how youre missing the fact that Prohashing does not employ us.

Pro-hashing believes they do, hence the 1099 forms. It then follows that the requirements for reporting and withholding NRA income and tax would need to be followed as well. Failure to do so exposes PH to the liability for the amount of taxes not withheld and not paid to the IRS.

[jimbo207]

If Prohashing believed we are employees why have they been referring to us as customers for so long? Rhetorical question obviously. The real question is do we meet the legal criteria. I think not. In fact, I think this will open Prohashing and all of its affiliates to more legal problems, particularly PH. We all have to pay tax on the money eventually, if we dont lose it first, lol.

[AppleMiner]

Customers who locate mining equipment in the United States will have to receive a 1099 form. Customers who have no connection with the United States - who live elsewhere and who have their miners elsewhere - are not affected.

Customers who live elsewhere AND who mine elsewhere? what about live elsewhere and mine here? or live here and mine elsewhere?
So if they live in europe and sent miners to a hash co-op in denver(IN the us) they will get 1099s?
What about people who LIVE in the US and sent miners to Sweeden to mine out of sweeden?

Anyone registered with their business does not need a 1099, and 1099's are not required for purchases of merchandise. The IRS has already ruled cryptocurrency is an asset (merchandise).
I agree with the other user, get a better lawyer. I've run an S corp for 18 years, you're getting bad advice.

Its merchandise? Last I heard it was Property...like land and housing property and followed some of those rules as far as changing hands and sales.

[pavvappav]

I think your mixing in the employee/contractor issue into this. I don't think anyone could, under the most liberal interpretation, mistake a miner as an employee. The issue your probably getting at is are we independent contractors. Business with employees must file W-4 forms, while those using contractors must provide 1099-MISC for payments over $600. You may also hear independent contractors refereed to as contract employees.

If I were to make a more valid argument against miners being contract employees and thus not needing 1099 forms is that there is no contract between PH and each miner. PH's registration process does not present the user with an acknowledgement of their ToS. In fact, you have to go to the bottom of their help page to find their ToS. The ToS does not make any mention of any legal relationship between PH and the miner. There is no privacy statement. This last point is very significant, as it may also violate the Gramm–Leach–Bliley Act (if not now, then after the expanded definition of financial institution contained in senate bill S1241). It also violates COPPA (Child online Privacy Protection act) by not asking for age before allowing an account to be created. Also if any of the "customers" or "employees" of PH are mining from California, it violates The California Online Privacy Protection Act of 2003. However, I'm not making these arguments -- so its a moot point.

[pavvappav]

Customers who locate mining equipment in the United States will have to receive a 1099 form. Customers who have no connection with the United States - who live elsewhere and who have their miners elsewhere - are not affected.

Customers who live elsewhere AND who mine elsewhere? what about live elsewhere and mine here? or live here and mine elsewhere?
So if they live in europe and sent miners to a hash co-op in denver(IN the us) they will get 1099s?
What about people who LIVE in the US and sent miners to Sweeden to mine out of sweeden?

I think Steve is trying to get to the Jurisdiction that rules the relationship. His argument is that the location of the mining equipment, or where the work is performed, dictates jurisdiction. I personally believe this to be erroneous -- It's been my experience that the IRS makes the determination that maximizes their tax income. In this case it would be a test based on if _any_ part of the transaction occured in the US, or if the receiver was a US person.

On the first part of the test it is easy. Did the work occur in the US? IRS wants its cut. Did the payment occur in the US jurisdiction? IRS wants its cut.

The second part is actually even more insidious. If you are a US person (Citizen or legal Resident) and your earnings occur completely outside the US and involve no other US entity then, yep you guessed it, the IRS wants its cut.

This then leads to the golden rule about how to evade the IRS: Don't.

Anyone registered with their business does not need a 1099, and 1099's are not required for purchases of merchandise. The IRS has already ruled cryptocurrency is an asset (merchandise).
I agree with the other user, get a better lawyer. I've run an S corp for 18 years, you're getting bad advice.

Its merchandise? Last I heard it was Property...like land and housing property and followed some of those rules as far as changing hands and sales.

The IRS has also ruled in the same ruling that concurrency you receive as a consequence of mining is income. Hence the need for a 1099. If you registered with a business, you can just use your EIN vs your SSN.

EDIT: Fix quotes x2.

[wowsuchcoin]

I mean, in many regards the damage is already done... For those who have been mining here since the L3+ first came out, they've probably amassed or sold significant coin/usd value. What happens when the gov says, hey Chris/Steve, what about all these people who didn't declare themselves, what can you tell us about them? Might not be this go round. Might not be next year. Might be some stupid bill that gets passed 5 years from now. You think the brothers would withhold IPs for our sakes? Doesn't sound like it. Sounds like they would do anything to be on the 'up and up'.

I don't know guys, really bummed about this turn of events. I get your perspective of things but you've essentially already pigeon holded your entire user base by making this decision without us. Combine that with leaving the fees the same despite coin switching profitability going into the dumpster, really the only value I saw was direct payouts in coins that I wanted. Saved me from having to monkey with the exchanges, which I do regularly anyways, but it was convenient. Furthermore on that note, while know this whole system upgrade has been taking the majority of your time, nothing new has been added in forever, and even then, other than VTC, its racks of coins i'm not interested in.

I've seen you make the argument in some of your posts that contrary to how Nicehash handled their business by allowing customers to store large wallets on their site, the increased legitimacy of guys going this route will provide us recourse in the event we lose money and have a face/name to sue. But lets be honest here, with daily payouts, what are we out? Few hundred, maybe power uses, a grand or two? You look at that daily total and see risk, but we see a lot of small fries you are screwing.

Kinda leaning towards jumping ship but at the same time, I've already logged massive hours here and I don't trust that my IP won't be flipped over to the fuzz at the drop of a hat. Quite a bummer any way you look at it. Clearly this is not anything we miners have to deal with at other pools. Respect that you want to make it in the good ol USofA but know that your are doing it at the expense of your user base. USERS. Not employees.

[jimbo207]

Yeah, i understand the difference between 1099/1040. And I dont discount any of your specific points and links @pav. My issue is simply that miners simply do not have this type of relationship with PH, perhaps that will change. Currently, PH is simply an aggregator of hashpower. They are no more responsible for reporting our information to the IRS than the post office is, or the internet itself. Its a pool where we share resources, not an employment agency.

Respect all your points. Just kinda being devils advocate at this point as it really doesnt matter to me where i point my 2 miners, lol.

[mcdavi02]

Canadian address : check