In an all-out effort to get-in-on-the-action as it were, the IRS has decided they would gladly tax Bitcoins as assets. Up until this point the media and the government down-played Bitcoin as little more than a foolish investment.
Our government, with its ever growing desire for tax revenue, has decided to classify the currency known as Bitcoin as an asset.
By classifying Bitcoin as an asset, the IRS has legitimized Bitcoin’s existence. This could have far- reaching implications. Being classified as an asset by the IRS, investors are able to offset tax liabilities with loses they may incur by buying and selling Bitcoins the same way investors in the stock market could. They also could incur additional taxes by any financial gains realized by their sale.
This classification should leave one a little concerned; while stocks, even though some consider stock investment little more than gambling, are at least tied to a real company. Bitcoin is quite different.
Bitcoin began as virtual money, not backed by any government or based on any real property. It was used like money, but only to the point of being used as a medium to trade goods and services online. Was this virtual currency created to avoid taxes for online purchases? Of course it was. It was a lot like an online swap meet.
Then Bitcoin became real, real coins made of real metal, mined and minted, bought and sold. There are horror stories connected to the mining of the metal used to mint the coins, but that’s another story.
The plot thickens. The IRS has also decided that if you receive wages in Bitcoin, that they are taxed at fair market value. Fair market value as determined by whom? And is the fair market value determined at the time you get paid or at the end of the year? The IRS has stated the value is determined at time of payment. And how will accurate records be kept for that?
Is Bitcoin a currency or an asset? When was the last time your wages were paid with an asset? To be considered legal tender, currency, used as a purchase medium, must be backed by a nation’s government. Now the rules have changed it seems. You can be paid with an asset – but will that require you to pay Social Security and Medicare out of those asset wages or just Federal taxes?
I do think that people should be able to trade goods or services of agreed equal worth without having to pay any taxes on such transactions, as long as currency is not used, and that was the original intent of Bitcoin. But the all-powerful, out of control IRS has always had trouble dealing with that concept.
I don’t use or own Bitcoin, nor will I. I’m not for or against Bitcoin. But I do find it interesting a government that is $17 Trillion in debt, is so desperate for tax revenues that it would consider a virtual currency as real. But then again what’s worth more; a Bitcoin or a U.S. Treasury note?
Maybe it’s because the value of one Bitcoin (at the time of this writing) is $586 U.S. Talk about a bubble. Bitcoin was worth around $1 two years ago now it eclipses $580! That’s a whole lot of capital gain, with a whole lot of downside.
We, in the middle class and up, are taxed to death as it is, so what’s next – a tax on hand shakes? The classification of Bitcoin as an asset is the first step in the IRS’s plan to tax every purchase, sale, or trade transaction online. Write it down.