Avoiding tax on Bitcoin? Think again, friend
Bitcoin has been getting plenty of coverage, ourselves included, but for those of you who don’t know, it’s essentially a decentralised virtual currency. Many people are under the illusion that because of this fact, it doesn’t accrue tax, but I’m sure the IRS would beg to differ.
The Government Accountability Office (GAO) released a report (PDF) which gives a clear example:
- Bill is a Bitcoin miner. He successfully mines 25 Bitcoins. Bill may have earned taxable income from his mining activities.
- Carol makes T-shirts and sells them over the Internet. She sells a T-shirt to Bill, who pays her with Bitcoins. Carol may have earned taxable income from the sale of the T-shirt.
It’s quite clear the IRS will not settle for this, and rightly so; real goods are being traded to which tax is owed back to the government. The same applies for income; Bitcoin is still an earning which, you guessed it, can also be taxed.
Yet why are they so quiet? Perhaps the IRS is looking for the best way to approach Bitcoin. After all, the currency is still anonymous and would be hard to track let alone prosecute for tax avoidance.
The fact is many people simply aren’t aware. Due to a lack of information a great deal of individuals could potentially end up getting stung for simply not thinking about tax instead of avoiding it intently.
Sadly, Bitcoin 2013, the conference which informs people of the currency has passed. The event would have been a good opportunity for spreading word of these latest legality issues. Perhaps 2014, if the currency continues to increase its influence at this rate?
For now, get me a pint – you can pay in Bitcoin.
What do you think of Bitcoin and its potential legal issues?
Learn more about the key issues surrounding the payments sector at Telecoms Tech World, on 26-27 November in London. Find out how you can attend here.
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