It is May 3, 2026. The IRS has released a technical memorandum regarding “Proof of Stake” rewards for LLCs with foreign partners or overseas server nodes.
- The Location Issue: If your LLC stakes Ethereum on a server located in Germany, the IRS may classify those rewards as Foreign Source Income, triggering complex Form 5471 reporting.
- Withholding: Foreign partners may be subject to a 30% withholding tax on staking rewards generated by a U.S.-based LLC unless a treaty applies.
- The Shark Insight: “Staking isn’t just ‘magic internet money’ anymore; it’s international commerce. If your LLC is playing in the DeFi space, your tax advisor needs to be a specialist in cross-border digital law. One wrong classification and you’re looking at ‘Double Taxation’ on your yield.”