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The IRS taxes... money, right? Does it tax virtual currency? Sorry, I'm not sure. My line of thought was perhaps there's something written where it states that

by veb 15y ago

The IRS taxes... money, right? Does it tax virtual currency? Sorry, I'm not sure. My line of thought was perhaps there's something written where it states that only the official currency is taxed. I agree with you though, the whole Bitcoin thing is getting very interesting. P.S. would the down-voters explain? It's not like I know everything about tax law, I was simply asking a question. :)

prodigal_erik 15y ago
No matter how you get paid, the IRS wants the same share of fair market value: http://www.irs.gov/taxtopics/tc420.html http://www.irs.gov/taxtopics/tc420.html. I can't think of a reason they'd treat bitcoin differently than foreign money.
- IgorPartola 15y ago
  Because BTC is wothless. Or rather that is what you could try to claim. If I mine a bunch of BTC and then pay you with it, I have not assigned any value to it. And if you never convert it to USD, you do not assign value to it either. When you fill out your tax forms, what would you put for its value? Moreover the IRS has no standard way to measure it. They cannot use Mt Gox any more than they can use Craig's list. The BTC is way too small and fluctuates too much to be accurately measured unless USD is involved somewhere. I am not a lawyer or a CPA and the above is just a theory, not advice.
  - maxerickson 15y ago
    If I give you 1 bitcoin and you give me a donut, we've agreed that 1 bitcoin is worth a donut. (it is similar to the situation with barter, in the U.S. it is taxable and the IRS will expect you to put a dollar value on the income and be able to defend the valuations you use)
    - IgorPartola 15y ago
      Huh, I did not know that. http://en.wikipedia.org/wiki/Barter#Tax_implications http://en.wikipedia.org/wiki/Barter#Tax_implications.
      - travisp 15y ago
        It could be worse than a regular barter transaction, because the IRS could be looking for capital gains on your bitcoins as well.
      - parfe 15y ago
        I believe that is why coupons say they are worth $0.0001 Guy wins free donuts and is issued a $237 tax bill. http://sports.yahoo.com/mlb/blog/big_league_stew/post/Astros-fan-learns-there-8217-s-no-such-thing-as?urn=mlb-wp3695 http://sports.yahoo.com/mlb/blog/big_league_stew/post/Astros...
  - wisty 15y ago
    If you aren't sure, you can ask the IRS.
quanticle 15y ago
* My line of thought was perhaps there's something written where it states that only the official currency is taxed.* That's true, but all those Bitcoins are getting converted into dollars/euro/yen/etc. at some point, so that's when the IRS (or tax agency) collects its due. Its like stocks. You pay capital gains taxes on stock when you cash them out dollars. I'd expect you would have to pay some sort of tax when you cash your Bitcoin out for dollars too.
- veb 15y ago
  Ah, thanks for clearing that up. Didn't think about that side of it. :)
Retric 15y ago
You pay taxes on value earned in USD. You could have been paid in ice or bitcoin but it's your job to pay the government in USD. PS: The IRS has made an exception for currency's earned in games unless real world goods exchange hands.

by veb 15y ago

prodigal_erik 15y ago

No matter how you get paid, the IRS wants the same share of fair market value: http://www.irs.gov/taxtopics/tc420.html http://www.irs.gov/taxtopics/tc420.html. I can't think of a reason they'd treat bitcoin differently than foreign money.

IgorPartola 15y ago
Because BTC is wothless. Or rather that is what you could try to claim. If I mine a bunch of BTC and then pay you with it, I have not assigned any value to it. And if you never convert it to USD, you do not assign value to it either. When you fill out your tax forms, what would you put for its value? Moreover the IRS has no standard way to measure it. They cannot use Mt Gox any more than they can use Craig's list. The BTC is way too small and fluctuates too much to be accurately measured unless USD is involved somewhere. I am not a lawyer or a CPA and the above is just a theory, not advice.
- maxerickson 15y ago
  If I give you 1 bitcoin and you give me a donut, we've agreed that 1 bitcoin is worth a donut. (it is similar to the situation with barter, in the U.S. it is taxable and the IRS will expect you to put a dollar value on the income and be able to defend the valuations you use)
  - IgorPartola 15y ago
    Huh, I did not know that. http://en.wikipedia.org/wiki/Barter#Tax_implications http://en.wikipedia.org/wiki/Barter#Tax_implications.
    - travisp 15y ago
      It could be worse than a regular barter transaction, because the IRS could be looking for capital gains on your bitcoins as well.
    - parfe 15y ago
      I believe that is why coupons say they are worth $0.0001 Guy wins free donuts and is issued a $237 tax bill. http://sports.yahoo.com/mlb/blog/big_league_stew/post/Astros-fan-learns-there-8217-s-no-such-thing-as?urn=mlb-wp3695 http://sports.yahoo.com/mlb/blog/big_league_stew/post/Astros...
- wisty 15y ago
  If you aren't sure, you can ask the IRS.

quanticle 15y ago

* My line of thought was perhaps there's something written where it states that only the official currency is taxed.* That's true, but all those Bitcoins are getting converted into dollars/euro/yen/etc. at some point, so that's when the IRS (or tax agency) collects its due. Its like stocks. You pay capital gains taxes on stock when you cash them out dollars. I'd expect you would have to pay some sort of tax when you cash your Bitcoin out for dollars too.

veb 15y ago
Ah, thanks for clearing that up. Didn't think about that side of it. :)

Retric 15y ago

You pay taxes on value earned in USD. You could have been paid in ice or bitcoin but it's your job to pay the government in USD. PS: The IRS has made an exception for currency's earned in games unless real world goods exchange hands.