Internal Revenue Service and Bitcoin
Bitcoin can be easily compared to Schrodinger’s currency. Without any regulations, Bitcoin could have become the only one way of payment or ever call itself a property. Recently, Internal Revenue Service discovered the condition of Bitcoin digital currency and gave its own description according to federal tax purposes.
Not a long time ago, Internal Revenue Service said that they will deal with Bitcoins, as well as with other electronic currency competitors that are stateless. IRS wants to discover those organizations not like money but like properties. The service wants to review all digital currencies that cannot be exchanged for bank notes. They plan to consider web money as the main assets as well as investment methods.
The owners of Bitcoins that are not considered as dealers will probably have to pay tax for value increase. Bitcoin mine-workers will have to reveal the algorithm of the currency and explain their income by telling about their findings. This reminds of the situation when other mine-workers had to do when finding more traditional resources.
Unlikely this decision will cause a lot of troubles, still, it has to be mentioned and noticed. In some way, the Internal Revenue Service’s decision even made it easier for Bitcoin investors to deal with the digital currency. From now one, every Bitcoin holder will have a better understanding of what he must do if he does not deny to pay tax.
Even though Internal Revenue Service declared Bitcoin a property but not money, it would be wrong to still call it a property if it loses stability. Bitcoin is not only digital currency but other currencies that we depend on such as USD, EUR, or GBP. Those currencies value constantly changes. Sometimes figures change every single day and it does affect Bitcoin.
We all forgot about the true meaning of money and its purposes. Money has to hold the value and its value should not change too much every day. However, we all depend on banks and political situation in countries and we have no control over exchange rates. One of the main goals of Bitcoin is to make digital money available for exchange, apart from holding its value.
To buy Bitcoins can be an experimental investment for a lot of people. However, Bitcoin digital currency instability should not affect its holders or even be denied as currency. Currency is a fundamental thing that should be available for people. The decision that was announced about Bitcoin will definitely become good news for those Bitcoin holders whose aim is to get profits from Bitcoins cost changes as long as the rules of gains and losses are positive for those who pay tax.
Such method can also be applied for some other Bitcoin high-level enthusiasts like Winklevoss twins. They have profits, however, there is no exact information about it. From now on Bitcoin holders can get an explanation by receiving a fine where they will find information about why old Bitcoin treatment is no longer valid. This will be a smart way to get an explanation why old methods are not suitable for their current position.
However, for people who use Bitcoins for paying rent or buying coffee, the Internal Revenue Service’s decision can be called unlucky because Bitcoin spendings are considered a taxable barter form. Bitcoin customers who use it for payments and spendings should understand the value of Bitcoin while making a transaction. It will be used for defining the gains and losses of the capital from the spender. Also, it will be used for the receiver’s basis according to his future gains and losses.
To count spendings on transactions is pretty easy. The customer should define the specific Bitcoin basis out, the period of holding, and understand whether short and long term gains of capital are used. Most investors find it a real hassle. Still, it is the only your decision whether you use coins, bank note or bitcoins. It is clear that Bitcoin is another payment method that it really easy and convenient to use. Using bitcoins is very simple as you do not have to stuff your wallet with coins, bank notes or worry about losing a card. Online money is what can definitely give you safety and confidence. Still, Bitcoin has privileges and disadvantages.
Internal Revenue Service also explained other aspects of Bitcoin regarding taxing. If the employer pays his worker in digital currency, the salary is considered as salary for purposes of employment tax. Also, if an employer pays his worker $600 and more in Bitcoin digital money, the employer will have to file the form 1099 as well as if money has been paid in cash.
It seems like the more rules about Bitcoin the more difficult is to understand them for us people who are not experts in digital currencies. At the moment, Bitcoin becomes legitimate. Before, Bitcoin was not considered legal. Probably, Internal Revenue Service just wants Bitcoin to become a real financial asset.
Some of Bitcoin users get upset about its instability while others take advantage of digital money and see it as the only one way to do illegal business. One of the reasons to be aware of Bitcoin failure is a recent crash of one of the most famous Bitcoin exchange that was called Mt. Gox. The exchange of Bitcoins was not regulated, therefore it did not provide any security. As the result, the exchange collapsed. It is good to not be controlled completely by the banking industry. However, this event proves that there should be some kind of regulation that would provide guarantees.
Of course, Internal Revenue Service has a right to claim that Bitcoin needs to be considered as a property. Who knows but such decision will provide Bitcoin asset safety and reliability.