Tag Archive for Bitcoin

The Crypto Battlefield: Financial Visionaries Vs. The Regulators

Mark Twain has been credited with expressing that “History doesn’t repeat itself but it often rhymes,” Regardless of who crafted the sentiment; it is clearly consistent with my experience associated with some disruptive technologies that are showing up in today’s financial markets.

Philosopher Arthur Schopenhauer once stated, “All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”

Distributed Ledger Technologies (DLT), the underlying software system that is simply and commonly referred to as Blockchain is an example of this “Truth”. This DLT system uses the collective computing power of many autonomous systems all agreeing on factual transactions covered by a specific ledger (e.g. Bitcoin, Litecoin, Dash, etc.). Read More

Written by | Posted in Cryptocurrency • Currency

Is Bitcoin As Good As Gold?

Joe Barbieri, Tax Connections

Gold and Bitcoin have been used synonymously as safe havens and currencies. What is a safe haven? It is a place to park wealth or money when there is a high degree of uncertainty in the environment. It has to be something that everyone can believe in even if the current institutions, governments or players in the business game are not available. The wealth has to be kept safe in times of trouble. What are the risks to someone’s wealth? There is theft by robbery if it is a physical asset. There is damage by fire, flood or other elements. There is the legal issue in not being able to determine if the asset is really yours or not. There is access risk in that you may own the asset but may not be able to get your hands on it. You may own the asset but may not be able to use it due to some restriction. Who else do you have to rely on to be able to use your wealth – spending it, investing it or converting it into different units of measure (currencies)? Read More

Written by | Posted in Currency

Cryptocurrency: A Story And Tax Consequences

Thinking about writing about Bitcoin, I remembered my maverick of an Economics teacher back in high school in Mumbai, India whose very thick south Indian accent meant we did not know what he was saying more than half the time. He started off the chapter on currency by having everyone in class remain standing till we came up with a definition for “Money”. Thankfully someone said “medium of exchange” real quick!

Although the underlying meaning of currency remains the same, the simple concept of a medium of exchange has undergone several upgrades particularly so with the cryptocurrency or digital payment systems known more commonly as Bitcoin.

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Written by | Posted in Cryptocurrency • IRS

Bipartisan Blockchain Caucus Launched In Congress

Annette Nellen

The Blockchain which is best known for the “guts” of how bitcoin transactions are verified, recorded and transacted, has uses beyond bitcoin. This decentralized system can be used to verify and process many types of transactions where two or more parties want verification of authenticity and to get information or transfer information or value. IBM and others have been exploring this. The Federal Reserve and others held a conference on the topic in June.

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Written by | Posted in Virtual Currency

Virtual Currency Tax Issues

Annette Nellen

In spring 2014, the IRS issued Notice 2014-21, initial guidance on the tax treatment of virtual currency such as Bitcoin, from mining to its general use. The IRS explained convertible virtual currency is to be treated as property.

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Written by | Posted in 2016 Tax update • Tax 2016

Digital Economy, Tax Issues And Due Diligence

We’ve been in the “digital economy” for some time, yet it continues to evolve with new business activities and ways of living. And, we see “old economy” businesses, like Ford Motor, move more into the new economy.

I define the digital economy from the perspective of how people and businesses engage in it:

• Transacting business with virtual currencies, such as Bitcoin;

• Providing digital goods and services; and

• Transacting business enhanced by the Internet, such as finding customers, including Read More

Written by | Posted in Federal • State And Local Tax (SALT) • State Tax • Tax Controversy • Virtual Currency

Bitcoin Transaction Reporting

A growing number of individuals and businesses own bitcoin or use it for transactions (perhaps with a third party actually handling the bitcoin to cash exchange). So, more people, including tax practitioners, need to know the federal guidance at Notice 2014-21.

I was interviewed recently for an article in Business Insider by Jonathan Marino on the topic. The article is titled: “Bitcoin will be a big mess for both Bitcoin holders and the IRS.” That may be true for some, but it doesn’t necessarily have to be.

Certainly, if an individual has been using bitcoin regularly and not doing anything to track the basis and value for each transaction, they have some catching up to do. If someone gets on a system of tracking, they should have the data all ready when it comes time to Read More

Written by | Posted in Virtual Currency

Help! Someone Just Contributed Bitcoin To My Church

Bitcoin is a virtual currency also known as a cryptocurrency. It got that name because it uses cryptography to secure transactions. The good news is you don’t have to understand everything about it in order to use it. The bad news is you need to know how to receive and spend any bitcoin that you receive as a church, other organization, or individually. For purposes of this article, we will not go into the details of Bitcoin. The primary feature of it is that it is a decentralized “currency,” not controlled by any one central authority. It can’t tinker with monetary policy and cause a meltdown, nor can it be appropriated by a central authority – it is independent of any government.

In order to use Bitcoin, you must set up an account. There are miniscule fees involved and it is instant. If you want to spend it, you can spend it in Bitcoins or it can be redeemed. Read More

Written by | Posted in IRS • Religion • Virtual Currency

IRS Targeting California As Its Booming Economy Overtakes Brazil As The World’s Seventh Largest Economy

California is overtaking Brazil as the world’s seventh-largest economy, bolstered by rising employment, home values and personal and corporate income, a year after the U.S. most-populous state surpassed Russia and Italy. Brazil has a population five times bigger than California’s 38.3 million; yet the Golden State with GDP of $2.20 trillion in 2013, expanded last year by almost every measure. In contrast, Brazil’s GDP declined 1% from $2.25 trillion. California’s economy has sustained its momentum since 2013, when the value of goods and services produced in the state topped that of Russia and Italy to vault California to No. 8 in the world. California grew an average of 4.1% annually during the last three years. Who is next ahead of California in the No. 6 spot? United Kingdom with a GDP of $2.68 trillion. Read More

Written by | Posted in FATCA • IRS • Tax Fraud/Evasion/Crimes • Virtual Currency

Think You Can Hide From The IRS? Target San Diego County, California

The IRS is using its extensive Big Data resources to pin-point their investigations to the wealthiest areas in San Diego County, California. The idea being that anyone who is selected for investigation in these areas will result in a higher tax liability than those who live in less affluent areas. The government is looking for non-filers, persons engaged in on-line and virtual currency transactions, businesses cheating or delinquent on employment taxes and individuals with undisclosed foreign bank accounts.

Non-Filers

When a taxpayer does not file and the IRS has information statements indicating a filing requirement, the IRS uses the data to file a return on behalf of the taxpayer if there is a projected balance owed. In 2012, the IRS used information statements to file 803,000 Read More

Written by | Posted in FATCA • IRS • Tax Fraud/Evasion/Crimes • Virtual Currency

Think You Can Hide From The IRS? Target Orange County, California

The IRS is using its extensive Big Data resources to pin-point their investigations to the wealthiest areas in Orange County, California. The idea being that anyone who is selected for investigation in these areas will result in a higher tax liability than those who live in less affluent areas. The government is looking for non-filers, persons engaged in on-line and virtual currency transactions, businesses cheating or delinquent on employment taxes and individuals with undisclosed foreign bank accounts.

Non-Filers

When a taxpayer does not file and the IRS has information statements indicating a filing requirement, the IRS uses the data to file a return on behalf of the taxpayer if there is a projected balance owed. In 2012, the IRS used information statements to file 803,000 Read More

Written by | Posted in FATCA • FBAR • IRS • OVDP • Virtual Currency

State Taxes And Bitcoin

What state tax rules and issues exist when a business accepts bitcoin from customers? What about for the customers? In March 2014, the IRS told us that convertible, virtual currency should be treated as property (rather than as currency under any special rule for currency, such as Code Section 988). That was in Notice 2014-21. States have mostly been silent on the topic. Where states conform to the federal system, that means, treat as property as well. But what about treatment for sales tax and some special state income tax issues, such as sourcing?

New York recently issued guidance on both income and sales tax.

I’m working on an article about state tax issues and virtual currency. What issues do you Read More

Written by | Posted in IRS • State And Local Tax (SALT)
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