The American Institute of CPAs has sent the IRS a letter to clarify tax status of small virtual currency transactions and nine other virtual currency issues, according to The Wall Street Journal.
A bitcoin payment for a small purchase can have an investment gain or loss on that purchase under the IRS’s existing tax treatment. This is an onerous reporting requirement.
Annette Nellen, a professor at San Jose State University, who helped draft the institute’s request, said the AICPA wants to know the tax rules before they become audit issues. Bitcoin Usage Grows
The number of daily bitcoin transactions has increased to 240,000 from 50,000 two years ago, according to Blockchain.info . Due to this growth, the IRS has conducted audits of bitcoin holders, according to Bryan Skarlatos, a tax lawyer at Kostelanetz & Fink in New York.
An IRS spokesperson declined to comment except to say the agency values input from tax professional organizations.
The IRS ruled in April 2014 that digital currencies are property, as are stocks and real estate. Hence, the profit from an investment in digital currencies is eligible for favorable capital gains tax rates if held longer than one year. Losses can offset gains. IRS Ruling: Pros And Cons
Barry Silbert , CEO of the Digital Currency Group, said the ruling was “incredibly helpful.”
At the same time, those who use bitcoin as an exchange medium engage in the sale of an investment. Using bitcoin to purchase something can result in a gain or loss, no matter the size of the purchase.Douglas Hutchings, a solar energy entrepreneur in Fayetteville, Ark., has purchased $1,500 worth of products using bitcoin through Amazon.com at a 15% to 20% discount. Hutchings used Purse.io, an online company, to arrange the transactions. He has not thought a lot about the taxes. Hutchings said he […]
