NFL star Odell Beckham Jr. (OBJ)’s decision to receive his $ 750,000 bitcoin (BTC) salary apparently cost him dearly due to the market crash after he signed the deal. Given fluctuations in current tax laws and cryptocurrency prices, OBJ earned according to some estimates 61% less than if he received the salary in fiat.
The loss highlighted the tax challenges of earning a salary or income in cryptocurrency, as crypto investors have to pay tax on the amount they owe when they receive it, not the amount they owe when they file a tax return.
On November 12 last year, OBJ signed a $ 750,000 one-year contract with the Los Angeles Rams. In a promotional Twitter post with CashApp, OBJ announced that he would receive 100% of his $ 750,000 annual salary in bitcoin.
At the time, Bitcoin broke all-time highs of around $ 69,044 and just two days ago, OBJ signed a deal with the Rams. Unfortunately for OBJ, Bitcoin is now down 46% from its highest level, which is currently $ 36,972.
According to sports business analyst and The Action Network senior executive producer Darren Rovell, perhaps OBJ’s decision to get the entire paycheck in bitcoin was not the most ingenious idea.
Rovel stated that OBJ’s full salary is now only $ 413,000, down from his original salary of $ 750,000.
With federal and state taxes at a combined rate of 50.3%, Odell will only earn $ 35,000 in the last two and a half months, which is only 1 BTC. This is far from the $ 90,000 he would have earned if he had been paid by Fiat.
Bitcoin enthusiast Joe Pompliano, brother of influencer Anthony, has claimed that there are large discrepancies between what Rowell received and reality, including that he was paid weekly instead of annually.
However, Rovel said that the weekly payments have nothing to do with the tax regime: “The full amount of the payment has been completed. It does not matter when he is paid. ”
This is not the first time that cryptocurrencies have caused significant tax deviations, and as cryptocurrency adoption continues to grow internationally, it will certainly not be the last. During the “crypto winter” there were many stories of users facing huge tax bills because of the price of assets when they received them, rather than the lowest price they received due to taxes.
Although the rules vary, the tax authorities usually require that the value of cryptocurrencies be declared at the time they are received. This leaves investors open to huge tax bills if the value of their cryptocurrencies falls between the time of purchase and the eventual filing of a tax return.
In 2019, Crypto Tax Australia director Adrian Forza told local publication Mickey the story of an Australian crypto investor who was forced to pay almost five times the value of his coins in taxes.
“It was a disaster … It was a really unfair outcome because he actually got the cryptocurrency and it weakened dramatically and now he has to pay taxes on the money he does not have.”
Related: TaxBit offers free tax forms for cryptocurrencies with new network
Forza went on to say that the biggest problem with the taxation of cryptocurrencies was not necessarily caused by the laws themselves, but rather by a misunderstanding of the tax laws among crypto enthusiasts.
“Demographics are men between the ages of 25 and 40, and many of them may have never invested in stocks before or seen an accountant,” he said.
This can also be the case in blockchain-based games like Axie Infinity. In a famous story, a 22-year-old from the Philippines bought two houses with the profits from the game.
I hope you’re talking to a tax agent, because now both Philippine and international regulators are coming in to collect these profits, warning Axie Infinity’s 2 million active players that all transfers of cryptocurrencies in the game are legally classified as taxable events. .