With tax season right around the corner. We thought it best to debunk any of the many rumors you might have heard or read on cryptocurrency taxes. The following information is straight from IRS Notice 2014-21. You you can read the whole notice by clicking this link.
To the IRS, any virtual currency that has an equal value in real currency (i.e. US Dollar, British Pound, Euro ect.). Is called a “convertible” virtual currency. An example they use for convertible virtual currency is Bitcoin. Since Bitcoin can be digitally traded between users. And purchased for, or exchanged into U.S. dollars, Euros, and other real or virtual currencies.
Once a convertible virtual currency is used in a sale or exchange of goods and services, in a real-world economy transaction. It then has tax consequences that may result in tax liability.
The notice goes on to answer frequent questions. Concerning what type of virtual currency transactions qualify as taxable. And yes, you must include, any virtual currency payment you have accepted. Profit you made from mining virtual currency for yourself or as a business. Qualifying gains and losses from exchanging virtual currency. And virtual currency used as payment of $600 or more to an independent contractor.
Along with all that info. The IRS also informs us on what determines the fair market value of virtual currency. But instead of stating that here. We recommend that you take a small amount of time out of your day and read up on the latest IRS notice yourself.