Updated for Tax Year 2018
Virtual currency like Bitcoin has shifted into the public eye te latest years. Some employees are paid with Bitcoin, more than a few retailers accept Bitcoin spil payment, and others hold the e-currency spil a capital asset. Recently, the Internal Revenue Service (IRS) clarified the tax treatment of Bitcoin and Bitcoin transactions.
Convertible virtual currency is subject to tax by the IRS
Bitcoin is the most widely circulated digital currency or e-currency spil of 2018. It’s called a convertible virtual currency because it has an omschrijving value ter real currency. The sale or exchange of a convertible virtual currency—including its use to pay for goods or services—has tax implications. The IRS answered some common questions about the tax treatment of Bitcoin transactions ter its latest Notice 2014-21. Tax treatment depends on how Bitcoins are held and used.
Bitcoin used to pay for goods and services taxed spil income
If you are an employer paying with Bitcoin, you vereiste report employee earnings to the IRS on W-2 forms.
- You voorwaarde convert the Bitcoin value to U.S. dollars spil of the date each payment is made and keep careful records.
- Wages paid te virtual currency are subject to withholding to the same extent spil dollar wages.
Employees voorwaarde report their total W-2 wages te dollars, even if earned spil Bitcoin. Self-employed individuals with Bitcoin gains or losses from sales transactions also vereiste convert the virtual currency to dollars spil of the day received, and report the figures on their tax comebacks.
Bitcoins held spil capital assets are taxed spil property
If you hold Bitcoins spil a capital asset, you vereiste treat them spil property for tax purposes. General tax principles applicable to property transactions apply.
If the Bitcoins are held spil a capital asset, like stocks or bonds, any build up or loss from the sale or exchange of the asset is taxed spil a capital build up or loss. Otherwise, the investor realizes ordinary build up or loss on an exchange.
Bitcoin miners voorwaarde report receipt of the virtual currency spil income
Some people “mine” Bitcoins by using rekentuig resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger.
According to the IRS, when a taxpayer successfully “mines” Bitcoins and has earnings from that activity whether ter the form of Bitcoins or any other form, he or she voorwaarde include it te his gross income after determining the fair market dollar value of the virtual currency spil of the day he received it. If a bitcoin miner is self-employed, his or hier gross earnings minus allowable tax deductions are also subject to the self-employment tax.
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The above article is intended to provide generalized financial information designed to educate a broad segment of the public, it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any activity, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
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