IRS says Bitcoin is taxable property, not a currency
NEW YORK (CNNMoney) — The Internal Revenue Service has issued a formal notice saying it can tax Bitcoin transactions, calling it a property — not a currency.
That’s big news for Bitcoin, the independent, electronic money that is growing in popularity. It’s not a blessing by the U.S. government, but it is a sign that authorities are taking the digital money more seriously.
On Tuesday, the IRS said payments worth at least $600 and made with bitcoins will be taxed the same way the agency treats property transactions. That includes payments made with bitcoins, gains realized by investing in it, and income derived from producing them on your computer, a process known as “mining.”
If you pay your employees with bitcoins, that would have to go on your staff’s W-2 forms, and they would have to pay federal income tax on it. Paying an independent contractor? They have to put bitcoin payments on their 1099.
“A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property,” the IRS said.