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IRS says bitcoins are taxable property

In the bitcoin community many refer to it as “cryptocurrency,” but the IRS looks at it something totally different. According to a new IRS statement, Bitcoin should be considered property, not currency. This is going to cause a lot of bookkeeping along with a lot of confusion.

Bloomberg explained how this would affect someone from day to day:

Under the ruling, purchasing a $2 cup of coffee with bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop.

If there are a lot of small transactions yes this can and will get messy for people. However, larger and less frequent transactions won’t cause too much trouble. This means anyone paying employees with bitcoin now need to receive a W2, and start filing taxes. Now how will the government track bitcoin purchases? Its a valid and unknown question at this point. If people store in online sites which have to report information to the government that could be one way, but you could keep this completely off the books.

These new rules could stop people from using bitcoin during the purchase of a coffee, or other small items. People who use bitcoin to buy houses or trips to space will have less paperwork, but could put in a place where they’d rather pay in USD.

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