As you enter into the cryptospace and really start learning how things work, inevitably you have to ask just exactly what type of asset is Bitcoin? When a brand new "thing" emerges, we as humans try to classify it based upon what we already know. Cryptocurrencies don't really fit right in any of the pre-existing models, but despite that we keep trying to fit an Ethereum shaped peg into a round hole, a square hole, a triangle hole, a.... well you get the point. Channeling the powers of my amazing mustache I have determined that Bitcoin is a completely new asset class that needs it's own forward-thinking set of regulations.
The Nature Of The Established
It is in our nature to want to define new things based upon what we already know, but cryptocurrencies warrant a little deeper and thoughtful investigation. Despite this, the SEC, CFTC, and the IRS all decided to measure cryptocurrencies by currently established standards and all three miss the mark, resulting in three different classifications for the beleaguered asset. Each organization wants to measure cryptocurrencies by their established rules and regulations and it just does not seem to fit right for any of them. Lets take a look at what each organization has said and how they now classify Bitcoin and cryptocurrencies.
The IRS Classifies Bitcoin As...
Property! According to the the last official statement on cryptocurrencies the stance from the IRS is that they are considered property. You can read their full statement here on their website, but below is the summary of how it applies to you as an individual;
The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:
- Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
- Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
- The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
- A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
So as you can see, for tax purposes this is how the IRS is guiding you in reporting your cryptocurrency and supporting the fact that they consider it property.
The SEC Classifies Bitcoin As...READ THE FULL STORY ON MY WEBSITE: https://www.cryptostache.com/2018/03/08/just-what-type-of-asset-are-cryptocurrencies-sec-cftc-irs-all-disagree/