The Switch ‘It’s going to be a nightmare’: Some bitcoin investors are in for a rocky tax season

“It’s going to be a nightmare for people who are worried about doing the right thing,” said Andrew Schaefer, a federally licensed tax expert in Florida who represents taxpayers before the Internal Revenue Service. At stake this year could be tens of billions in profit and perhaps more, Schaefer said, judging by the surge of interest in bitcoin. Some of that could be subject to federal and state taxes based on how many people sold their assets.

“2016 saw some questions come up,” said Lisa Greene-Lewis, a lead certified public accountant at TurboTax. “As people are doing their taxes [this year], we may see more because more people have been trading and selling.”

[Bitcoin is teaching libertarians everything they don’t know about economics]

The most recent IRS guidance on the matter is from 2014, when it said taxpayers should treat their virtual currency like property. Under that rule, taxpayers must declare any profit, also known as capital gains, or losses they take when they sell bitcoin at a different price than when they bought it. The same policy applies to purchases of real-world goods. For example, suppose you tried to buy a cup of coffee with bitcoin. That would technically count as a sale of your bitcoin. You might owe capital gains tax if the bitcoin you paid at the cash register had increased in value from the time you first acquired it. The IRS declined to comment for this story, referring back to that 2014 guidance.

via ‘It’s going to be a nightmare’: Some bitcoin investors are in for a rocky tax season – The Washington Post