With an exponential gain in value and thousands of businesses now accepting it as a form of payment, Bitcoin has quickly become one of the trending topics throughout the country. While there are various types of cryptocurrency out there, Bitcoin is currently the most popular form of digital currency (also known as virtual or cryptocurrency) throughout the world and is able to be exchanged for U.S dollars, Euros, and other real currency. In addition, Bitcoin can be traded for other virtual currencies, such as Ripple or Ethereum currency.
Whether people use cryptocurrencies to pay for products and services or strictly for investment purposes, they may not be aware that they have a possible taxable impact.
If a taxpayer purchases s virtual currency and uses it to purchase something (trades the cryptocurrecy for a good or service), the IRS requires him to calculate a capital gain or loss on each transaction. Capital gains on personal-use property are reportable and subject to tax.
The AICPA recently asked the IRS for some equitable relief by adopting a “de minimus election,” which provides a $200 threshold for excluding capital gains income on personal transactions. This is not yet in effect and as a result, taxpayers are on the hook for tax liability with all cryptocurrency transactions.
Patrick Camuso, CPA is founder and owner of Camuso CPA, a CPA firm serving cryptocurrency investors, miners and businesses nationwide. Camuso CPA was the first CPA firm in the country to accept cryptocurrency as a form of payment for professional services. Camuso CPA works with investors and businesses on cryptocurrency accounting, tax preparation and tax planning.