In a move completely unsurprising to those of us in the barter industry, the IRS recently released their official guidance on the subject of Bitcoin and other virtual currencies. According to the guidance, “virtual currency is treated as property for U.S. federal tax purposes.”
What does this mean for the coming-of-age story of Bitcoin?
That depends on who you are asking.
If you ask those cypherpunks who contributed to the atmosphere of underworld style anonymous transactioning associated with Bitcoin, it’s the death-knell. You might as well have told them that the internet was being torn down.
If you ask anyone else, the general reaction would probably be, “Meh. Who cares?”
To those of us in the barter industry…we knew the IRS would want their piece of the pie. The IRS has taxed barter since the 1980’s, and its surprising it took them this long to say anything official about Bitcoin. Of course they want you to pay taxes on your Bitcoin. Of course they want you to report it on a W-2 or 1099. Of course they want you to report any capital gains or losses. Duh.
Interestingly, the IRS still doesn’t accept any other currency than Federal Reserve notes in exchange for tax bills. So while the IRS would like you to report your Bitcoin income, you still have to pay them in good old U.S. Dollars.
The only surprise about this announcement, in this commentator’s view, is that it took as long as it did to have an official reaction.