Feeds

Revealed: What the US taxman really thinks of crypto-cash Bitcoin

Essential reading if you want to pay your staff in BTC, for instance

5 things you didn’t know about cloud backup

The US Internal Revenue Service (IRS) has laid out a formal set of policies for how it will handle Bitcoin and other virtual currencies for tax purposes.

In a guide (PDF) released Tuesday, the IRS said that it would be considering cryptocurrencies to be property, and as such would be subject to US laws regarding the transfer and holding of property in calculating taxes.

"The Internal Revenue Service is aware that 'virtual currency' may be used to pay for goods or services, or held for investment," the IRS said in prefacing its sixteen point guide on virtual currencies.

"In some environments, it operates like 'real' currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction."

According to the IRS, the ruling allows employers to report wages paid to both employees and contractors as property transactions. This will allow employers and business owners to log and report wages paid out in virtual currency through either a form W-2 (as salary) or a form 1099 (for contract work).

The rulings would apply to transactions in which currency valued at $600 or more was exchanged, the same threshold applied to property transactions under IRS rules.

The ruling will also prevent users from reporting virtual coins in a currency gain or loss as they could foreign currencies. Users will, for tax purposes, value the currency for tax reporting purposes based on the market value at the time the transaction took place (so a virtual currency transaction taking place last summer would be based on currency value at the time rather than a currency's current trading price.)

Additionally, the IRS said that it will classify companies who facilitate Bitcoin (and other virtual currency transactions) as third-party settlement (TPSO) organizations for tax purposes, placing a classification on the brokers who help conduct virtual currency transactions between merchants and end-users.

The classification comes as many Americans are preparing to file their federal and state income taxes ahead of the 15 April filing deadline.

Government classifications of cryptocurrencies have been a matter of debate and speculation in recent months. Bitcoin in particular has seen prices rise and fall with the release of government decrees and classifications regarding the virtual currency.

Bitcoin markets reacted to the IRS release with little outrage or surprise. The Coindesk Bitcoin Price Index remained (relatively) stable over the course of the day before and after the announcement. The Bitcoin Foundation has yet to offer its two cents (or .00003BTC) on the matter. ®

The essential guide to IT transformation

More from The Register

next story
Britain's housing crisis: What are we going to do about it?
Rent control: Better than bombs at destroying housing
Top beak: UK privacy law may be reconsidered because of social media
Rise of Twitter etc creates 'enormous challenges'
GCHQ protesters stick it to British spooks ... by drinking urine
Activists told NOT to snap pics of staff at the concrete doughnut
What do you mean, I have to POST a PHYSICAL CHEQUE to get my gun licence?
Stop bitching about firearms fees - we need computerisation
Ex US cybersecurity czar guilty in child sex abuse website case
Health and Human Services IT security chief headed online to share vile images
We need less U.S. in our WWW – Euro digital chief Steelie Neelie
EC moves to shift status quo at Internet Governance Forum
Oz biz regulator discovers shared servers in EPIC FACEPALM
'Not aware' that one IP can hold more than one Website
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.