In November 2017 the IRS was successful in federal court in its quest to gain access to bitcoin transactions. They now have the records for any transaction worth more than $20,000, including exchanging bitcoins for dollars, and sending or receiving bitcoins to/from another user. The time frame of available information covers transactions between 2013 and 2015. The IRS is expecting a large number of bitcoin users to pay taxes owed on unreported transactions. We would be surprised if this was the end of the quest for information by the IRS. With 2016 and 2017 being big years for bitcoin activity, and other successful cryptocurrencies being left out of the November 2017 court order, a lot of possible unreported transactions are not covered by this subpoena. (more…)
Based on an IRS investigation, taxpayers numbering only in the 800’s in each of the years 2013 through 2015 reported a transaction description likely related to Bitcoin on the form used to report capital gains or losses from property transactions. In 2013, the IRS issued guidance to say that virtual currency transactions were property transactions, rather than currency transactions, and followed that up with practical guidance in April 2014 in their Virtual Currency Guidance, Notice 2014-21. (more…)
For better or worse, the public face of blockchain technology has been Bitcoin, the polarizing crypto-currency. While Bitcoin’s detractors point to high-profile criminal activities and price volatility to question its ultimate long-term viability, a broader base of people knowledgeable in the foundational blockchain technology see potential applications beyond the creation and trading of currency not controlled by any centralized authority. (more…)
It’s been awhile since I’ve posted anything about Bitcoin. Given that it seems to pop into the headlines fairly often, I thought it was time for a revisit after closing out 2014. How did Bitcoin fare for the remainder of 2014 and start of 2015? Let’s see.
Here is a nice summary of performance other than price (we’ll get to that later) in 2014. Some key statistics are:
At long last, the IRS has finally offered some clarity on the federal tax implications of transacting and investing in bitcoins and other virtual currencies. When Naila first discussed this topic in her post of February 19, 2014, which dealt with the taxability of mining bitcoins and the impact on foreign account reporting when bitcoins are held in a digital wallet, the guidance was not formalized or readily available to taxpayers. Things are different now.
One of the appeals of bitcoin (or any virtual currency) is that it operates outside the boundaries of established monetary authority without control by any political jurisdiction. Many would say this same condition is responsible for the significant mishaps to date with bitcoin exchanges and the volatile trading value. These calamities include exchange bankruptcies; elicit activities transacted in bitcoins, bitcoin thefts and more. Since bitcoin is not a currency backed by any central government, it falls outside most existing regulatory borders. Or does it?
The Bitcoin (in particular, and virtual currency, in general) continues to enjoy widespread engagement, despite what many believed might have been its death knell when Mt. Gox infamously collapsed by declaring bankruptcy in late February 2014 after reporting that 850,000 bitcoins were stolen by hackers. Mt. Gox, based in Japan, was once the world’s largest bitcoin exchange. And never mind that 200,000 “stolen” bitcoins were eventually “found” in an abandoned wallet. I suspect that discovery didn’t give many naysayers pause to consider the merits of a virtual currency system.
These days, bitcoin has been a growing topic with my clients. Therefore, to wrap up our series on bitcoin blogs, Part I and Part II, I thought I would share my recent research for a client on the taxability of mining bitcoins and on their Report of Foreign Bank and Financial Accounts (FBAR) when they are held in a digital wallet.
What Might Be Its Financial Reporting and Tax Implications?
Two weeks ago I summarized, to the best of my non-technical ability, the underlying framework of headline-grabbing Bitcoin (see Part I). But really…Bitcoin and other virtual currencies raise a host of interesting issues for businesses, which is why the discussion in the first place. This Part II continuation of the earlier post introduces some of those considerations.