Click to Skip Ad
Closing in...

If you buy through a BGR link, we may earn an affiliate commission, helping support our expert product labs.

Will the IRS take a bite out of Bitcoin?

Published May 10th, 2013 7:50AM EDT
Bitcoin Taxes

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.”

Zach Epstein
Zach Epstein Executive Editor

Zach Epstein has been the Executive Editor at BGR for more than 10 years. He manages BGR’s editorial team and ensures that best practices are adhered to. He also oversees the Ecommerce team and directs the daily flow of all content. Zach first joined BGR in 2007 as a Staff Writer covering business, technology, and entertainment.

His work has been quoted by countless top news organizations, and he was recently named one of the world's top 10 “power mobile influencers” by Forbes. Prior to BGR, Zach worked as an executive in marketing and business development with two private telcos.