IRS tries to tax Bitcoin users
Bitcoins have had somewhat of a hard time of late. While the currency is certainly resilient to many outside effects upon it, it’s hard to deny that Bitcoin is slowly going out of the limelight as the cryptocurrency of choice. And, while Bitcoin may not have quite bit the dust yet, a new US ruling could help accelerate it’s decline.
As of March 25th, Bitcoin has been classified as property, not currency, by the IRS. This means that anyone dealing in Bitcoins now needs to keep tabs of their spending as they’ll be subject to general tax principles that surround property transactions.
Speaking to PYMTS.com, David Evans, chairman of the Global Economics Group said: “Anytime you buy or sell you have an IRS record-keeping obligation.”
“Obviously, they are only going to enforce that selectively, but people that are heavily into this will have issues.”
“It imposes huge paperwork requirements; every time you pay with an appreciated Bitcoin, you face a tax liability,” Evans continued. “And it means you have to pay your personal income tax rate of about 10 per cent to 40 per cent (more if state taxes apply) if you’ve held the appreciated Bitcoin for a year or less.”
Evans believes that if users stick to making purchases that are only denominated in Bitcoins, then users should be fine – as it’d be hard to prove a case of value appreciating. Businesses should also not need to worry about such a fee on using Bitcoins if they store money in a Bitcoin wallet that lets them receive a ‘real’ currency. Evans suggests that most will just ignore the IRS rule anyway.
One knock-on effect of this is that many people may just hold on to their Bitcoins in hope they appreciate. This would stall spending of the cryptocurrency and ultimately stall many developments around it. But, as it’s not a centralised currency, nor will payments made outside of the US be levy to such charges, it seems as if this is really just another futile attempt by the US to provide some form of control and monetisation of the digital phenomenon.
Can you see this affecting how people use Bitcoins in any meaningful way?
[Image: saturnism - Flickr]