US revenue says bitcoin should be considered property, not currency

The US Internal Revenue Service has said bitcoin should be viewed and taxed as property, giving a little clarity to the shifting regulatory landscape of virtual currency.

Despite the fact that many users treat bitcoin like a regulated currency, “it does not have legal tender status in any jurisdiction,” the government agency responsible for tax collection said.

That means that employers who choose to pay wages in bitcoin will have to report those wages just like any other payment made with property, and bitcoin income will be subject to the normal federal income withholding and payroll taxes.

Shortly after the announcement, Senator Tom Carpe praised the decision by the IRS.

“The Internal Revenue Service’s guidance today provides clarity for taxpayers who want to ensure that they’re doing the right thing and playing by the rules when utilizing bitcoin and other digital currencies,” he said.

Bitcoin, the computer-driven virtual currency that has gained momentum since it first popped up in 2009, has presented challenges for regulators. It has attracted a growing following of users and merchants, but it has no central bank and no government oversight.

In the wake of the collapse of one of the largest online exchanges for buying and selling bitcoin last month, governments around the world have stepped up their efforts to figure out a way to protect consumers against fraud and other illegal activities.

NYT