Some experts think the digital currency Bitcoin is about to be regulated by the US authorities, who suspect it is being used to evade taxes.
The Treasury unit called FinCEN, the Financial Crimes Enforcement Network, already has rules about Bitcoin. The IRS is likely to follow.
FinCEN says Bitcoin exchanges and Bitcoin miners should register as Money Services Businesses (MSBs) and comply with anti-money laundering regulations.
Still, ordinary Bitcoin users don’t have to register just to purchase goods and services. The IRS treats it as pay in kind, just as if you paid in groceries or anything else of value. You must value what’s provided, withhold income and employment taxes in cash and send the money to the IRS. You also must issue a Form W-2.
With no banking or government involvement, Bitcoin may be anonymous. It may even be ideal for someone who intentionally tries not to pay tax. That may be a small piece of the Bitcoin payment universe.
But for most people who file tax returns and report their income whether or not it shows up on a Form W-2 or 1099, it probably isn’t the tax haven some are suggesting it is.
The IRS will most certainly take steps to regularize tax reporting.
Read more at: Tax Times blog