The US Internal Revenue Service has clarified its position on convertible virtual currencies, including Bitcoin. The agency noted that Bitcoin will be treated as property, rather than currency, for tax purposes.
While the IRS acknowledged that some virtual currencies operate similar to “real” currency, it noted that no country has approved them as legal tender. Convertible virtual currencies are defined as those that have “an equivalent value in real currency.”
A FAQ section of the document explains the types of reporting that you’ll need to file if you’re trading in Bitcoins and other convertible virtual currencies. For instance, if you receive Bitcoins as payment, you’ll need to count them toward your gross income by calculating the fair market value in US dollars based on an exchange price.
If you’d like to provide feedback to the IRS and the Treasury Department about Bitcoin, the agencies are soliciting comments from the public. You’ll have to mail your thoughts in or submit them in person.
The notice comes just in time for Tax Day, so you can get right to work calculating how much you’ll have to pay Uncle Sam for all those Bitcoins you’ve been mining all year.
Image credit: Jim Watson / AFP / Getty Images
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