Due to the market drop, after he signed the deal, NFL star Odell Beckham Jr.’s (OBJ) decision to take his $750,000 salary in Bitcoin (BTC) appears to have cost him dearly. Some believe that OBJ made 61% less than if he had taken his compensation in fiat. Due to the whims of cryptocurrency tax legislation and current values.
The loss has brought to light the financial implications of receiving a salary or dividend in cryptocurrency. As crypto investors must pay tax on the amount received, not what it is worth when they file their taxes.
Last November, OBJ agreed to a one-year contract worth $750,000 with the Los Angeles Rams. OBJ stated that he would be earning 100% of his $750,000 yearly pay in Bitcoin in a promotional Twitter tweet in collaboration with CashApp.
OBJ’s decision to take his whole paycheck in Bitcoin, may not have been the best decision
Bitcoin was nearing all-time highs of $69,044, and OBJ had just signed with the Rams two days before. Sadly for OBJ, Bitcoin is now valued at $36,972, down 46% from its high.
OBJ’s decision to take his whole paycheck in Bitcoin, according to Darren Rovell, a sports business expert and senior executive producer for The Action Network, may not have been the best decision.
In comparison to the original $750,000, Rovell claims that OBJ’s whole pay is now only worth $413,000 dollars.
Odell will only have earned $35,000 over the past two and a half months. This translates to just 1 BTC. When both Federal and State taxes are taken into account at a combined rate of 50.3%. This is a far cry from the $90,000 he would have received if his pay had been paid in fiat.
Joe Pompilano, the brother of influencer Anthony, noted that there were numerous big inconsistencies between Rovell’s earnings and reality. Such as the fact that he got paid weekly rather than annually.
This isn’t the first time that crypto assets have resulted in significant tax disparities, and it won’t be the last as crypto adoption grows globally. Many customers faced large tax payments owing to the price of assets when they obtained them, not the rock bottom price they sank to by tax time, during “crypto winter.”
Although regulations differ, it is typical for taxing authorities to demand that the value of crypto assets be declared at the time of receipt. This exposes investors to a hefty tax charge. If the value of their crypto assets drops between the time of acquisition and the time they file their tax returns.
Adrian Forza, director of Crypto Tax Australia, told local publication Micky in 2019 about a crypto investor in Australia who forced to pay roughly five times the value of his coins in taxes.
“It was a complete disaster… It was an extremely unjust outcome because he essentially acquired bitcoin, the value of which has plummeted. And now he is required to pay tax on money he does not have.”
According to Forza, the largest difficulty with cryptocurrency taxation isn’t, particularly the regulations themselves. But rather the lack of awareness of tax laws among crypto aficionados.
“The demographic is 25-to-40-year-old guys. And many of them have never invested in stocks or even seen an accountant before,” he explained.
This might also apply to blockchain-based play-to-earn games like Axie Infinity. In one well-known instance, a 22-year-old from the Philippines used the money he earned from the game to buy two residences.
Hopefully, he consulted with a tax advisor because now, both Philippine and international officials are after those earnings. Telling Axie Infinity’s 2 million active players that any in-game crypto-asset transfers legally considered as taxable activities.