According to the IRS anything purchased using a digital currency is liable to be taxed as a capital gain The rollercoaster ride for some cryptocurrency investors could be about to take another tax-time lurch, according to experts, as the taxman looks for his share of transactions made using bitcoin and its like. Wild fluctuations in the value of digital currencies – bitcoin surged from less than one dollar in 2010 to $997 at the start of the 2017 to nearly $20,000 before settling back to around $8,500 on Friday – have exposed investors to tax bills the value of their coins may no longer meet.
According to the Internal Revenue Service, anything purchased using a digital currency is liable to be taxed as a capital gain. So anyone who has cashed out or paid for anything using cryptocurrency may have capital gains to report to the IRS.
Another source of confusion is that crypto-brokers are not required to issue 1099 disclosure forms – the forms used by the IRS to report income other than wages, bonuses and tips – on digital currencies, but individuals are still responsible for reporting gains. In November, a US district court judge in California ordered Coinbase, a popular platform for trading bitcoin, to turn over identifying information on accounts worth at least $20,000 during 2013 to 2015.
Bitcoin is the first, and the biggest, “cryptocurrency” – a decentralised tradeable digital asset. Whether it is a bad investment is the big question.
Bitcoin can only be used as a medium of exchange and in practice has been far more important for the dark economy than it has for most legitimate uses. The lack of any central authority makes bitcoin remarkably resilient to censorship, corruption – or regulation. Read more from theguardian.com…
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