Bitcoin is a good way for people to conduct business off the grid, but the free ride may soon come to an end. Everyone’s favorite virtual currency has been on quite a wild ride over the past few weeks. The mainstream media finally caught wind of Bitcoin and curious parties sent it skyrocketing to $220 before watching it plummet below $70 a few short days later. It has been quite a roller coaster, but all this attention may have caught the IRS’s eye, too — Forbes contributor Robert Wood noted in a recent column that the Treasury’s FinCEN already has rules pertaining to Bitcoin, and soon the IRS might as well.
“Income is income, whether you get it in cash or in kind,” Wood wrote. “Bitcoin may be accepted as currency and may not be easy to trace but so are trades and barters. When you barter or swap one item for another, both parties have tax consequences.” The IRS requires that taxpayers report any and all income, of course, and there’s a good chance the agency will soon grow tired of seeing some people use Bitcoin to game the system.
“The FinCEN rules say Bitcoin exchanges and Bitcoin miners should register as Money Services Businesses (MSBs) and comply with anti-money laundering regulations,” Wood noted. “Ordinary Bitcoin users don’t have to register just to purchase goods and services. But will Forms 1099 and other nettlesome signs of civilization soon bite Bitcoin? Yes, and probably soon.”