Bitcoin and taxes: a complex relationship
Bitcoin users might still think they are avoiding taxes until today, but that is not true. Well, at least in most cases. Just remember that, although the currency is virtual, it can be exchanged by real products, services and fiat currencies. So, the IRS is always watching…
This digital market full of daily transactions should be generating a significant income to the United States government, but it’s not going quite as the authorities expected. However, IRS representatives’ silence means nothing because, in theory, cryptocurrency users should still pay taxes.
Can we call this a grey financial area? Maybe for now, because this is about to turn black as coal, once the IRS is able to find a way to successfully charge Bitcoin-related taxes. At least, according to a new report made by the Government Accountability Office (GAO), the IRS is going to watch Bitcoin and other virtual currencies closely from now on.
The document “GAO: IRS Needs to Keep an Eye on Virtual Currencies” (read more about it here) lively advises the IRS to do a better job when it comes to making Bitcoin users know they too have taxes to pay. A strong option to stop the withholding is the much discussed regulation.
As stated by the office, the lack of formal guidance can cause some people to think that tax doesn’t apply to virtual currencies, so IRS must spread the word… and quickly.
Since the rules seem pretty clear – if you provide services or sell goods for Bitcoin, you have income and you have to pay taxes. The same applies to the act of trading Bitcoins for cash -, we can expect a stronger action from the IRS in a near future. The institution is likely to have a Bitcoin Center in the future, following the example of the Financial Crimes Enforcement Network (FinCen), which has been analyzing cryptocurrency for a long time.
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