The IRS recently issued Rev. Rul. 2023-14, providing guidance on the taxation treatment of rewards that cryptocurrency holders may receive from proof-of-stake blockchain validation. According to recent IRS guidance on cryptocurrency taxation, cryptocurrency holders participating in proof-of-stake blockchain validation will recognize taxable income when they have “dominion and control” over the received cryptocurrency rewards.

Cryptocurrency blockchains require validation from other cryptocurrency holders, and one mechanism for this validation is proof-of-stake verification. In proof-of-stake, cryptocurrency holders stake a certain amount of cryptocurrency or use it as collateral. In exchange, the cryptocurrency network may select them to validate the blockchain. If they correctly validate the blockchain, they may receive additional cryptocurrency rewards. If they incorrectly validate the blockchain, they may lose some or all of the staked cryptocurrency.

Previously, the IRS declared taxation on cryptocurrency transactions. The IRS’s stance on cryptocurrency taxation is grounded in the Internal Revenue Code and decades of case law interpreting it. The Internal Revenue Code generally taxes “all income from whatever source derived.” Courts interpret income broadly as receiving any type of property or something of value, and cryptocurrency falls under this definition due to its inherent value.

The Internal Revenue Code and case law require taxpayers to actually receive property or something of value before taxation. For instance, when a crabber tosses crab traps into the sea, they do not recognize taxable income. It’s only when a fisherman brings the caught crabs to market and exchanges them for money that income is acknowledged. Recent IRS guidance applies the same principles to cryptocurrency transactions. While cryptocurrency transactions are taxable, cryptocurrency holders do not need to pay taxes until they actually receive something of value and have control over it.

According to recent IRS guidance, cryptocurrency holders participating in proof-of-stake validation will recognize taxable income when they have dominion or control over the additional cryptocurrency rewards. This typically occurs when the additional currency is in the cryptocurrency holder’s wallet and can be freely traded or disposed of. Just as the crabber does not need to pay taxes when merely placing crab traps in the sea, cryptocurrency traders do not recognize any income when simply staking cryptocurrency or engaging in validation.


What are Self-Employment Taxes? Self-employment taxes comprise Social Security and Medicare taxes, which are then remitted to federal and state tax authorities. While salaried employees also pay these taxes, there’s a significant distinction. Typically, employers are required to withhold the corresponding Social Security and Medicare taxes from an employee’s wages, whereas self-employed individuals are responsible for paying their own share and the matching amount, or “both halves.” Social Security and Medicare taxes are not considered income tax for self-employed individuals.

Self-employment taxes are based on the net profit of a business (income minus relevant expenses). Of the net profit, 92.35% is subject to self-employment taxes. The self-employment tax rate on net profit is 15.3%, with 12.4% allocated to Social Security tax and 2.9% to Medicare tax.

For the 2023 tax year, the Social Security tax is applicable to the first $160,200 of self-employment income. This is an increase from the $147,000 limit for the 2022 tax year. There is no limit for Medicare self-employment tax on net profit income subject to the 2.9% tax. Additional 0.9% Medicare tax rate may apply to self-employment income if the net income exceeds $200,000 (for single filers) or $250,000 (for married joint filers).

Who is Subject to Self-Employment Taxes? Self-employment taxes apply to individuals whose total net income from self-employment or working for themselves amounts to $400 or more. It’s worth noting that if income from services as a church employee reaches or exceeds $108.28, it is classified as self-employment.

Other individuals considered self-employed for tax purposes include sole proprietors or independent contractors. Jobs typically classified as self-employment for wage earners may include:

Rideshare drivers, Food delivery drivers, Gardeners, Childcare providers, Home care workers, Street vendors, Professional house cleaners, and; Construction contractors.

Self-employment taxes apply to taxpayers of all ages, including those already receiving Social Security or Medicare benefits.

How to Pay Self-Employment Taxes? Federal taxes must be reported and paid to the Internal Revenue Service (IRS). State and local taxes must be reported and paid to the respective state tax authority using either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN).

Self-employed individuals typically use IRS Schedule C to calculate the net profit from self-employment activities for each tax year. Similarly, the net profit is generally the value of gross income minus appropriate business expenses. Taxpayers can then use Schedule SE to calculate the amount of self-employment tax owed.

If taxpayers use a tax year that isn’t based on the standard calendar year, they must use the tax rates and maximum income limits in effect at the beginning of their tax year, even if rates change after the start of the year, whichever is lower.

When to Pay Self-Employment Taxes? Self-employment taxes must be reported once a year by the applicable tax year’s filing deadline annually. Since self-employed individuals don’t have taxes withheld from “paychecks,” they typically must pay estimated taxes quarterly. Self-employed individuals required to pay estimated taxes quarterly may include:

Those owing at least $1,000 in federal income tax within the year, and Those with income that requires them to pay at least 90% of their current year’s tax obligation, or if their adjusted gross income exceeds $75,000 ($150,000 for married filing jointly), they must pay 100% of the previous year’s tax obligation, whichever is smaller.

Tax Deductions: Despite having to pay self-employment taxes in full or “both halves,” self-employed individuals can enjoy several tax deductions in addition to the benefits of self-employment. If self-employed individuals file their tax return using Form 1040 or 1040-SR with Schedule C attached, they may qualify for the Earned Income Tax Credit (EITC).

Under Section 2042 of the Small Business Jobs Act, self-employed individuals can deduct health insurance premiums. This deduction amount is calculated based on self-employment net income.

Additionally, you can deduct 50% of your self-employment taxes on your federal income tax return. For example, if Schedule SE determines that a taxpayer owes $3,000 in self-employment taxes for the year, they’ll need to pay $1,500 when filing taxes, as the additional $1,500 is considered a tax credit on Form 1040.

Businesses may also be eligible for a Qualified Business Income (QBI) deduction of up to 20%. QBI includes any income, gains, deductions, and losses from trades or businesses. The QBI deduction, also known as the Section 199A deduction, allows taxpayers to deduct up to 20% of business income earned from qualified trades, businesses, dividends, trusts, or estates. The deduction is available regardless of itemized deductions on Schedule A or any standard deduction. Self-employed individuals (if eligible) may also benefit from deductions such as home office expenses, business use of a car, and more.

California: California follows most of the same self-employment tax procedures as the IRS. California also imposes a 15.3% self-employment tax rate. However, California has strict standards when it comes to determining who is classified as self-employed versus an employee of another company. Starting in 2020, California Assembly Bill 5 (AB5) set standards for this crucial determination between employees or independent contractors. In California, drivers focused on transportation or delivery (e.g., Uber or Doordash) may be classified as independent contractors, but this classification remains in limbo as ride-sharing companies and the state of California are in litigation over whether these workers should be classified as 1099 or W2 employees.

California has a broader definition of self-employed individuals and considers most residents who don’t receive checks from business entities as self-employed. This is because half of employment taxes for wage earners are automatically withheld from their checks to fund state and federal programs, while self-employed workers must pay estimated taxes quarterly. In California, you may need to pay self-employment taxes if you:

Work for yourself, Are a sole proprietor or independent contractor, Are a partner in a trade or business partnership, Are a part-time business owner, or Are a member of a limited liability company structured as a partnership.

In California, there’s a Social Security tax assessment cap of $118,500, while Medicare has no income limit. Taxpayers required to pay quarterly taxes must adhere to the following filing dates:

First Quarter Payment – April 18 Second Quarter Payment – June 15 Third Quarter Payment – September 15 Fourth Quarter Payment – January 15 of the following year

Failure to pay self-employment taxes may result in taxpayers facing severe tax penalties. Tax penalties typically start at 5% of the total tax due from the original filing date and increase by that percentage monthly or fraction thereof until the penalty reaches a maximum of 25%.

Potential tax deductions for self-employed individuals in California include health insurance, self-employment taxes, and unreimbursed employee expenses.

Combatting employee theft is unfortunately a significant issue that many employers must address, damaging trust between employers and employees and creating an unbearable financial burden on operations. Taking proactive measures to prevent and address theft incidents is crucial for protecting businesses. On average, workplace theft causes losses of up to $50 billion annually.


The Extent of Employee Theft

Employee theft is increasingly prevalent and concerning. 25% of businesses report losses exceeding $1 million due to employee theft. Statistics also show that 37.1% of all employee theft cases involve management employees. Additionally, self-reported statistics indicate that employee theft cases have risen to as high as 37.5%. Sadly, one-third of business bankruptcies are caused by employee theft.

Further research indicates that employees are more likely to steal from employers than non-employees, accounting for 44% of losses related to theft in retail businesses and other stores. Implementing stricter and more effective security measures is crucial to prevent economic losses to businesses and the innocent employees who depend on them.

Business Prevention Measures

To reduce the risk of employee theft and protect the financial integrity of businesses, business owners can take the following steps to implement secure business operations:

  1. Establish Clear Policies and Procedures: Develop comprehensive policies outlining acceptable behavior, ethical standards, and the consequences of theft or fraud. Clarifying these policies and their consequences is a critical step in preventing theft.
  2. Screen and Train Employees: Conduct thorough background checks on potential employees to identify any red flags or previous criminal records. By implementing screening and training measures, you can create an environment that detects and addresses suspicious activity before theft occurs.
  3. Implement Strict Access Controls: Allow only authorized personnel access to sensitive areas, financial records, and valuable assets. Utilize surveillance cameras and access control systems to monitor employee activities and prevent theft.
  4. Promote a Culture of Transparency and Accountability: Encourage open communication channels where employees can easily report suspicious behavior or concerns. Conduct regular audits and reviews of financial transactions to identify discrepancies and address them promptly.
  5. Reward Ethical Behavior: Recognize and reward employees who demonstrate honesty and integrity in their conduct. Encourage reporting of theft or fraud incidents to cultivate a culture of accountability.

Seek Professional Guidance

Despite preventive measures, businesses may still fall victim to employee theft. In such cases, seeking professional guidance is crucial to effectively address legal and financial impacts. Legal professionals, financial advisors, and insurance experts can be powerful resources in combating employee theft.

Choosing the right business insurance is a fundamental part of addressing the consequences of employee theft. Your local agent can be a reliable partner in helping you understand and select detailed commercial insurance policies covering employee theft and similar losses. With effective insurance coverage, you can have peace of mind knowing that your business interests are extra protected. Contact your local agent now for more information on business insurance policy options.

Raising awareness about the risk, symptoms, and signs of stroke and preventing strokes is the focus of National Stroke Awareness Month. Stroke remains one of the leading causes of disability and death worldwide. Fortunately, everyone can take proactive measures to reduce and minimize stroke risk through lifestyle adjustments and proactive health management.


Identifying Stroke Risk Factors

Before delving into prevention strategies, it’s essential to understand the risk factors associated with stroke. While factors like age and family history are beyond our control, many other factors can be managed or altered through lifestyle changes. Common risk factors for stroke include:

  • High blood pressure
  • Diabetes
  • High cholesterol
  • Smoking
  • Obesity
  • Lack of physical activity
  • Excessive alcohol consumption
  • Poor dietary habits

Tip 1: Maintain Healthy Blood Pressure

High blood pressure is the most significant modifiable risk factor for stroke. Keeping blood pressure within a healthy range can significantly reduce the risk of stroke. Here are some tips to maintain healthy blood pressure:

  • Eat a balanced diet rich in fruits, vegetables, whole grains, and lean meats or proteins.
  • Limit sodium intake and avoid high-salt processed foods.
  • Exercise regularly, aiming for at least 150 minutes of moderate-intensity exercise per week.
  • Use relaxation techniques like deep breathing, meditation, or yoga to manage stress.
  • Take prescription medications as directed by healthcare providers.

Tip 2: Control Blood Sugar Levels

Diabetes is another significant risk factor for stroke because high blood sugar damages blood vessels and increases the risk of cardiovascular disease. To control blood sugar levels and reduce the risk of stroke:

  • Follow a diabetes-friendly diet emphasizing natural foods and limiting sugar and refined carbohydrates.
  • Monitor blood sugar levels regularly and adjust medications as needed.
  • Exercise regularly to improve insulin sensitivity and blood sugar control.
  • Maintain a healthy weight through diet and exercise.
  • Avoid smoking, as it exacerbates diabetes-related complications.

Tip 3: Adopt a Heart-Healthy Diet

A nutritious diet plays a crucial role in preventing stroke and promoting overall heart health. Include these heart-healthy foods in your diet:

  • Fruits and vegetables: Choose a variety of colorful fruits and vegetables rich in vitamins, minerals, and antioxidants.
  • Whole grains: Opt for whole grains such as brown rice, quinoa, oats, and whole wheat bread.
  • Lean protein: Include sources of lean protein such as poultry, fish, legumes, tofu, and beans.
  • Healthy fats: Choose sources of healthy fats like avocados, nuts, seeds, and olive oil. Limit saturated and trans fats and cholesterol-rich foods.

Tip 4: Exercise Regularly

Regular physical activity is crucial for maintaining cardiovascular health and reducing the risk of stroke. Aim for at least 150 minutes of moderate-intensity aerobic exercise or 75 minutes of vigorous-intensity exercise per week. Incorporate a variety of activities such as walking, jogging, cycling, swimming, or strength training to maintain heart and vascular health.

Tip 5: Avoid Smoking and Limit Alcohol Consumption

Smoking is a significant risk factor for stroke as it damages blood vessels and increases the risk of blood clots. If you smoke, quitting is one of the best ways to reduce the risk of stroke and improve overall health. Additionally, limit alcohol intake to moderate levels, as excessive alcohol consumption raises blood pressure and increases the risk of stroke.

Ensuring Your Health with Insurance Protection

While stroke is a health condition that can be improved by making the right decisions about health and lifestyle, some circumstances are beyond control. In these situations, health insurance is a key component in reducing the economic burden of unforeseen health complications and alleviating stress so that you can focus on recovery.