The filing deadline for U.S. taxes is coming up, and the Internal Revenue Service has drafted guidelines for accounting for Bitcoins and other virtual currencies. The document (PDF) acknowledges that cryptocurrencies are not considered legal tender in the U.S. However, because Bitcoins and their ilk can be purchased, traded, and exchanged for real money, they're considered convertible virtual currencies. For tax purposes, virtual currencies are treated as property, muck like stocks or bonds.
And the government wants a piece of the action, of course.
According to the IRS, taxpayers who mine cryptocurrencies must include the fair market value of those virtual coins as part of their gross income. Taxpayers who receive virtual currency as payment for goods or services must also account for it in their income. There are rules for businesses, too, plus details on how to handle gains and losses associated with transactions.
Bitcoins have been around for years, and it appears the IRS is ready to assess penalties against folks who have been treating them "in a manner that is inconsistent" with the new rules. "Failure to timely or correctly report virtual currency transactions when required to do so may be subject to information reporting penalties," the IRS says, though it adds that "penalty relief may be available to taxpayers and persons required to file an information return who are able to establish that the underpayment or failure to properly file information returns is due to reasonable cause."
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