Prohashing Mining Pool Forums

DuncanBoaz wrote:Here are some Solutions for all you idiots that "Feel" some type of way about Paying Taxes for a Government that fundamentally gives you Access to Water, Electricity, and Protection from Foreign Entities - CHECK YOUR PRIVILEGED. Christ almighty you're able to run some of the most sophisticated machinery and computational equipment ever produced.

...if you think that Government is what's providing *any* of that, or access to that, I got a seafront property in Denver I'd like to sell you...

Steve Sokolowski wrote:
I don't want to drag on something that I think has been made far too big a deal of already, but I just want to say that the rationale for the forms is the following. Our business model is that we purchase hashrate from miners, use it to mine the most profitable coin, and then pay them a debt owed in cryptocurrencies that they choose (or dollars, if they choose that). There are documents from the agencies that back up that it's perfectly legal to purchase computing power from people, but buying things from suppliers requires sending these forms. But again, the number of affected customers is probably going to be something like 4%. This is not the end of the world.

What you do with the forms, and how you interpret your tax liability, is up to you. While there might be one out there, I wasn't able to find any cases of miners being sued by the IRS. We are not making a statement as to whether you owe taxes, we're just giving you paperwork and you decide how to complete your own taxes.

Plus, I'm not an accountant, so you can't take my word on this, but you might want to look into deductions for electricity costs and the cost of the equipment itself, if you determine that you owe taxes.

...wait, what? Holy mother of tapdancing politicians. I grew up around and dealing with politicians, and I have to say - most would be green with envy over that tapdance you just pulled in the first paragraph. Not even Nicehash could get away saying it like that, and still have the balls to claim their customers were independent contractors requiring 1099 filings!
To clarify, the website improvements/changes are small potatoes to the whole "btw you're all gonna get 1099's for christmas & new years, lulz." crap that was tossed into the end of this thread release.
You operate almost *EXACTLY* like any other pool out there that I can connect to with a start.bat file, the only difference is the multi-coin payout (which others are doing as well now). For that SERVICE, your CUSTOMERS pay you a 5% fee, taken out before rewards are credited once per day (or when threshold is met). We are not selling you hashpower, it was clarified in other posts/threads I read months ago that the 5% FEE out of OUR PPS earnings was to compensate YOU for your multi-coin algorithm software, the fact we are saved the time & effort of having to keep & maintain multiple wallets, and having to spend time & energy bouncing between exchanges, trying to sell the mined coins/fragments of coins, to get the payout coin we wished to earn initially.
If we were selling you hashpower, that means there would be a buyer system just like Nicehash had. That would mean there is a contract system set up for X amount of kh/mh/gh being purchased for X period of time at X value aimed at X pool, to be paid out to X wallet. That system is *NOT* in place here.

I agree with the earlier posts. Get a new lawyer, because I have no idea where he bought his degree - he sure as hell doesn't know what the f**k he's talking about, if he's encouraged you to follow this business model - you won't HAVE a business. Other users have posted multiple actual sources contradicting your statements as being valid, as well as the literal clusterf**k you're about to cause yourself financially as well as socially, and I'm pretty sure you ignored them.

Your estimate of 4% lost workers... lol. You have what, 10k registered users presently? I see 5k~7k at best connected workers, are you telling me that a mere few hundred/couple thousand are from the USA only? That means, at best, you're a US based service offering foreign miners a place to mine and be paid back in multi-coin. Based on the links already shown regarding the 1099's, you'd still have to withhold the value earned for them (at a different rate), if not straight up offer to send them equivalent documents for their own country tax forms (per another person I spoke with in the EU). You have an international tax lawyer set up for that? Gotten yourself well versed in 140+ countries tax laws yet so you don't accidentally trip Interpol or another nations version of the IRS?
More like you forgot to add a zero there. Small time miners may make up only about ~40% of the overall network hash power, but number wise make up nearly 80% of the miners worldwide. That college kid with a couple gaming cards (or some nice roommates letting him use their comps too), earning that extra ~$1000+ a year is going to make a major difference in his life, but f**k reporting it for tax purposes. The lower wage worker who saved up and bought a gaming computer, and can earn an extra $60~$150 a month, isn't going to be aiming at a pool that requires him to submit more private information and be taxed even further into the hole.
The bigger fish with gigantic processing power? They're either going to evade via VPN, move out of country, or operate through an LLC or foreign-held friends/partners who hold the wallet & private keys... or slush through monero/multiple pools/solo mining, and keep their wallets well hidden. A very small percent would willingly declare cryptos as income or put them on their tax forms. Anyone who says "the bell won't toll for me" obviously hasn't paid attention to California or Hawaii as perfect examples of why NOT to trust the Federal Government to protect you, but rather punish you for being a "perfect law abiding citizen".

You also, at least in appearance, didn't take into account that the x11 algorithm is nearly dead. Unless someone does something soon to revive it, or find some way to repurpose the joke that was Bitmains D3 line, that is probably well over half the connected miners gone by deprecation within the next 3 months, *at best* - if I read the present processing power on this pool correctly. This decision is more far-reaching than you've mapped out, because of this disconnect you have with the reality on this side of the mining pool.

Amen!

Steve Sokolowski wrote:
I don't want to drag on something that I think has been made far too big a deal of already, but I just want to say that the rationale for the forms is the following. Our business model is that we purchase hashrate from miners, use it to mine the most profitable coin, and then pay them a debt owed in cryptocurrencies that they choose (or dollars, if they choose that). There are documents from the agencies that back up that it's perfectly legal to purchase computing power from people, but buying things from suppliers requires sending these forms. But again, the number of affected customers is probably going to be something like 4%. This is not the end of the world.

Steve, please rethink at least how you describe your business model. Paraphrasing, you pay miners a fee for their hash rate (USD), and convert that fee into a virtual currency of the miner's choosing, or direct cash (via Coinbase AFIK).

This description, in part, may classify you (using your own words) as a Money Services Business (MSB) based on Department of Treasury FINCEN definitions.
Specifically (1) that you convert currency on the behalf of your clients (Payment owed converted into coin of their choosing), and (5) you then transmit that coinage to their destination account.

This is not a tax issue, but a financial crimes issue. If you use a businuess checking account, and your bank gets wind that you _MAY_ _POSSIBLY_ even remotely be a MSB, they are required to report you unless you have declared yourself to them. BOA is notorious for closing accounts rather than dealing with the regulatory paperwork of dealing with MSB accounts related to cryptocurrency.

If you are a MSB you are bound by KYC and AML regulations as a US based MSB. I know you guys are not a bank. Banks are explicitly excluded from MSB definitions for the purpose of FINCEN activities.

Source: https://www.fincen.gov/money-services-b ... definition

Edit: Fix Quotes. Bold in quotes added by me for emphasis.

Yeah.. this is kind of a shame. Until the US government understands exactly how they would like to classify crypto currencies and then also apply some fair form of valuation based on the volatility all of my friends have said they will be leaving once the requirement lands. I get it's a complicated situation but when most folks are barely breaking even on their rigs, (which cannot be fully written off) people will not want the tax man assessing income on a statement of earnings. A 1099 is the same form given to a contractor for payment summary. Imagine the wild interpretation of "income" that the IRS will consider. Self employment taxes too.

Nah.... You guys will probably end up with mostly foreign and lite miners.

Steve Sokolowski wrote:

jimbo207 wrote:Will SSNs be required? I assume 1099s will say $0.00 since coins are not legal tender and there is no real way to value it until it is sold for legal tender. Asking for a friend.

No to my knowledge right now. All that's needed, I think, is name and address to mail the form - but I'll check on that. All we have to do to comply is fill out about 8 fields on a short form and send it in the paper mail to the address. We already have the data in the database.

We may also include a printed report that is not tax information but which summarizes earnings for the year by coin and by rig, as a free service.

Ok, but your online form has a field for a Tax ID number (TIN) which is generally regarded as your SSN AFAIK. So is it the case to provide SSN or not? Thanks..

jimbo207 wrote:Will SSNs be required? I assume 1099s will say $0.00 since coins are not legal tender and there is no real way to value it until it is sold for legal tender. Asking for a friend.

Sure there is a real way to value it. They are valued at fair market value at the point in time you take possession of them into a wallet you control.
So if you mined 1 LTC today and its value is $250, you made $250 today and now owe taxes on that $250 made today.

When you sell it you owe capital gains on what you sold it for, minus the $250 starting fee that you have already paid on it.

And then, after all the taxes are paid...you then have to claim it on your income taxes as revenue earned, oh yeah, and you get to pay taxes on that again also. Enjoy!

Apple i think you and some others are missing the point that some of the post above are making. WE are not mining any coins according to the way Stave has worded the use on the 1099 forms. we are merely selling Prohashing our hashing power for them to mine coins with. Then as stated above our earnings in US Dollars(hence the 1099) are being paid in what ever coins we would like just like an exchange. See quote below.

I have said this a number of times and have spoke to my tax attorney, his words not mine, Run!!! that will be one big cluster when they try to explain to the IRS and the Feds how they can issue 1099s for US Dollars but pay us in coins.

Steve, please rethink at least how you describe your business model. Paraphrasing, you pay miners a fee for their hash rate (USD), and convert that fee into a virtual currency of the miner's choosing, or direct cash (via Coinbase AFIK).

This description, in part, may classify you (using your own words) as a Money Services Business (MSB) based on Department of Treasury FINCEN definitions.
Specifically (1) that you convert currency on the behalf of your clients (Payment owed converted into coin of their choosing), and (5) you then transmit that coinage to their destination account.

This is not a tax issue, but a financial crimes issue. If you use a businuess checking account, and your bank gets wind that you _MAY_ _POSSIBLY_ even remotely be a MSB, they are required to report you unless you have declared yourself to them. BOA is notorious for closing accounts rather than dealing with the regulatory paperwork of dealing with MSB accounts related to cryptocurrency.

If you are a MSB you are bound by KYC and AML regulations as a US based MSB. I know you guys are not a bank. Banks are explicitly excluded from MSB definitions for the purpose of FINCEN activities.

I will say it 1 last time get a second opinion!!!! Your Lawyer is on crack.

greaseman316 wrote:Apple i think you and some others are missing the point that some of the post above are making. WE are not mining any coins according to the way Stave has worded the use on the 1099 forms. we are merely selling Prohashing our hashing power for them to mine coins with. Then as stated above our earnings in US Dollars(hence the 1099) are being paid in what ever coins we would like just like an exchange. See quote below.

I have said this a number of times and have spoke to my tax attorney, his words not mine, Run!!! that will be one big cluster when they try to explain to the IRS and the Feds how they can issue 1099s for US Dollars but pay us in coins.

As far as the government and the IRS is concerned, they can pay us in cattle, goats, chickens, kittens, puppies, or even fairy whiskers.
As long as there is a agreed upon rate of exchange, you owe the FAIR MARKET VALUE of the items received for payment. Now while a Cow might be worth more in Iowa than it is in Florida, thank's to the coin exchanges we do actually have a live, acceptable rate of exchange for the payment type we are being paid in, as such, there is a monetary value that can be associated with the payment received, and THAT is what you owe the taxes on. If you help a buddy build a house, and he pays you for your work by giving you an old ford F-150 that he had sitting around and wasn't using that was valued at over $10,000 do you think the IRS is ok with you taking a form of payment that isn't in cash and you not paying anything on it for income earned?

The only troubling issues might be when miners here go to try and deduct expenses for a mining operation that we didn't mine. Because we were contract employees and issued 1099s, we worked for THEM, is the pools the only ones allowed to do mining operation deductions now? If I mine I can deduct my expenses. If I work for someone else who mines, They get to deduct and I just get a salary, and if the 1099 represents an independant contractor salary to work for their company, then that means I was compensated for work, I worked for them not me, and they get the deductions and not me? THATS the part that worries me, working for the pool means I'm not working for me. Can you deduct expenses if paid to work for someone else on the tax breakdown?

The whole 1099 issue was enough to scare me into mining on another pool as of last month where they don't issue 1099s and likely never will because they are not a US based mining pool. I am not sure what issues if any the 1099s will cause for next year, but facing the option of finding out or finding another pool and keep operating the way I have for the past 5 years, I choose to keep operating how I have been and not sign up for surprises in a years time.

gnode wrote:Steve and Chris, you need a different lawyer. The guy you hired is in left field on this one. We are just using your software with our own equipment and you pay us nothing, we pay you a fee. Like a cloud service such as Amazon Web services. Amazon doesn't send out 1099 to subscribers.

If they pay you nothing why do you mine here?

I wish Amazon paid me for using their equipment...

AppleMiner wrote:

greaseman316 wrote:Apple i think you and some others are missing the point that some of the post above are making. WE are not mining any coins according to the way Stave has worded the use on the 1099 forms. we are merely selling Prohashing our hashing power for them to mine coins with. Then as stated above our earnings in US Dollars(hence the 1099) are being paid in what ever coins we would like just like an exchange. See quote below.

I have said this a number of times and have spoke to my tax attorney, his words not mine, Run!!! that will be one big cluster when they try to explain to the IRS and the Feds how they can issue 1099s for US Dollars but pay us in coins.

As far as the government and the IRS is concerned, they can pay us in cattle, goats, chickens, kittens, puppies, or even fairy whiskers.
As long as there is a agreed upon rate of exchange, you owe the FAIR MARKET VALUE of the items received for payment. Now while a Cow might be worth more in Iowa than it is in Florida, thank's to the coin exchanges we do actually have a live, acceptable rate of exchange for the payment type we are being paid in, as such, there is a monetary value that can be associated with the payment received, and THAT is what you owe the taxes on. If you help a buddy build a house, and he pays you for your work by giving you an old ford F-150 that he had sitting around and wasn't using that was valued at over $10,000 do you think the IRS is ok with you taking a form of payment that isn't in cash and you not paying anything on it for income earned?

The only troubling issues might be when miners here go to try and deduct expenses for a mining operation that we didn't mine. Because we were contract employees and issued 1099s, we worked for THEM, is the pools the only ones allowed to do mining operation deductions now? If I mine I can deduct my expenses. If I work for someone else who mines, They get to deduct and I just get a salary, and if the 1099 represents an independant contractor salary to work for their company, then that means I was compensated for work, I worked for them not me, and they get the deductions and not me? THATS the part that worries me, working for the pool means I'm not working for me. Can you deduct expenses if paid to work for someone else on the tax breakdown?

The whole 1099 issue was enough to scare me into mining on another pool as of last month where they don't issue 1099s and likely never will because they are not a US based mining pool. I am not sure what issues if any the 1099s will cause for next year, but facing the option of finding out or finding another pool and keep operating the way I have for the past 5 years, I choose to keep operating how I have been and not sign up for surprises in a years time.

1099's are not only for independent contractors.

Payers use Form 1099-MISC, Miscellaneous Income, to:
1. Report payments made in the course of a trade or business to a person who's not an employee or to an unincorporated business.
2. Report payments of $10 or more in gross royalties or $600 or more in rents or compensation. Report payment information to the IRS and the person or business that received the payment.

Prohashing is compensating us and if you want to be legal about the income you receive you need to pay taxes on it. If you don't like that, move to another country. That's part of the deal with living in the US.

You get 1099's from all sorts of companies today.