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IRS Says Digital Money Bitcoin Is Not Currency And Will Be Taxed Like Property

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IRS Says Digital Money Bitcoin Is Not Currency And Will Be Taxed Like Property

Bitcoin

The Bitcoin saga continues.

Bitcoin, the digital currency that has surprised the digital and financial world because of its sudden popularity and increasing use by today’s digital consumers, is currently facing an identity crisis (Do read our feature on ? Bitcoin: The Rise And Risk of Virtual Currency? https://www.thebitbag.com/bitcoin-rise-risk-virtual-currency/61593 ) .

Is Bitcoin money or not?

This question was answered in the past few days by the United Sates federal government when an IRS ruling declared that Bitcoin will be taxed not as a form of currency but like property.

The U.S. Internal Revenue Service said that even if Bitcoin is used in the same manner as paper currency and coins ( as payment for services and goods), the digital ?currency? is not recognized and accepted as ?legal tender? by any country or state. Therefore, the IRS declared that ?Virtual currency is treated as property for U.S. Federal tax purposes…… General tax principles that apply to property transactions apply to transactions using virtual currency.?

What does this mean for consumers, particularly users of Bitcoin?

  • For income earners, it simply means that salaries and wages paid for in Bitcoin will be subjected to withholding and payroll taxes under federal income tax regulations and must be reported via the W-2 forms.
  • For business establishments that accept Bitcoin when they sell their goods and services, the fair market value of the payment will be the basis of the tax imposed on their gross income. The IRS added that the fair market value is calculated on the value of the U.S. Dollar on the date the payment is received by the seller.
  • For traders of Bitcoin, who hold Bitcoin as stocks, bonds or a form of capital asset, the IRS says that a capital gains tax will be imposed.

On the Coinbase exchange (founded in June of 2012, Coinbase is a Bitcoin wallet and platform where merchants and consumers can transact with Bitcoin), Bitcoin registered at $ 570.24 today (27 March), down from $ 587.35 last Tuesday when the ruling was announced.

Steve Brecher of WeiserMazars, an accounting firm said that with Bitcoin, ?There are still a lot of unanswered questions, but this is a good start.? He added that the Internal Revenue Service has ?given certainty to dealing in digital currency.?

 

Photo Source: https://www.facebook.com/Bitcoinsnews

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