IRS: Bitcoins are property, not money - Fox 28: South Bend, Elkhart IN News, Weather, Sports

IRS: Bitcoins are property, not money

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Virtual money doesn't count as currency when it comes to your tax returns.  The IRS announced Tuesday that since virtual money, like bitcoins, are not legal tender they will be treated as property for U.S. federal tax purposes.

What does this mean for bitcoin users?  The IRS gave some answers on their website:

  • Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
  • Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
  • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
  • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.

 

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