TAX NEWS YOU CAN USE. SUBJECT: BITCOINS, Do you use them? Executive Summary: The IRS will tax them! According to a report from Thomson Reuters, New guidance. Notice 2014-21 provides that virtual currency is treated as property for U.S. federal tax purposes, and that the general tax principles that apply to property transactions apply to transactions using virtual currency. (Notice 2014-21, FAQ No. 1) Virtual currency isnt treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes. (Notice 2014-21, FAQ No. 2) Accordingly: 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. (Notice 2014-21, FAQ No. 11) Payments using virtual currency made to independent contractors and other service providers are taxable, and self-employment tax rules generally apply. (Notice 2014-21, FAQ No. 10) Normally, payers must issue Form 1099. (Notice 2014-21, FAQ No. 13) 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 (see below). (Notice 2014-21, FAQ No. 7) A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. (FAQ No. 12)
Posted on: Wed, 26 Mar 2014 13:40:57 +0000
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