With April 15—otherwise known as Tax Day in the United States—rapidly approaching, there's a frenzy of activity focused around getting ready for the big day's arrival. There's one more point to consider, though not necessarily for this year, particularly for Bitcoin users that were wondering what the tax issues accompanying Bitcoin would be as the IRS released new guidelines around Bitcoin and those like it.
Many businesses, by some reports, were looking to get in on Bitcoin on a commercial basis in much the same way that Overstock.com did not so long ago, recently tallying up a full $1 million in sales in the virtual currency and by now likely well beyond that. But the IRS rules about the virtual currency—or lack thereof—left many hesitant to get in lest an unexpected tax bill arrive later. But now, the IRS has set up the necessary rules companies were looking for to get in play, and the biggest point is that Bitcoins are now to be considered property as opposed to currency.
But the new guidelines aren't just geared toward businesses, but also to miners. Those who mine cryptocurrency now have a double tax charge afoot; the fair market value of the currency mined on the day it is mined as part of gross income, and an accompanying capital gains tax due on the day the cryptocurrency is sold, according to reports. Plus, for those who mine cryptocurrency as a business, the resulting income is to be treated as self-employment income, subject to the self-employment taxes.
Investors, meanwhile, have much the same point in mind, with the value of the purchased cryptocurrency when purchased being the basis of capital gains taxes when the Bitcoins are sold in the future. Those held for more than a year and a day, meanwhile, would be subject to the “long-term capital gains rate”, by some reports, which is 15 percent.
Even regular consumers have some issues here, but this is where things get particularly complicated. Under standard rules, a consumer who has $25 worth of Bitcoin that subsequently appreciates to $75, who then goes to buy with it should inform the IRS of the capital gain of $50 made at the time of purchase. That's a burden on Bitcoin users, and one that likely won't be followed in many cases. Essentially, as some are beginning to note, the IRS rules are setting up as being advantageous to those who buy and hold Bitcoin, as though it were a commodity, and being disadvantageous to those who want to buy Bitcoin and use it as a medium of exchange, like an alternate digital cash.
This actually lines up well with recent reports about the Tera Group, who was working to establish rules about how to trade Bitcoin as though it were a commodity. The new IRS rules seem to be treating Bitcoin not like a currency, but like a commodity, which is what the Tera Group and those like it would have really needed to start trading in Bitcoin futures. Naturally none of this should be treated as tax advice, which should be obtained from an accountant, but the overall path here does look like a move supporting putting Bitcoin and its kind in the same classification as gold and silver. That's a classification that comes with issues of its own, of course, but for the most part, it looks like the IRS has put its weight behind the perception that Bitcoin and cryptocurrencies are commodities instead.
Edited by Cassandra Tucker
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