Could the value of bitcoin continue to increase? One teenage bitcoin millionaire predicts we’ve not see the top for the cybercurrency.
On a bumpy ride lately, the value of a bitcoin has ranged from between $2,365 and $2,200 in just the last week. The teen reportedly has 403 bitcoins after starting investing back in 2011 with some money his grandmother gifted him.
IRS interest and Coinbase summons
Over the last year, the IRS has become more concerned about the underreporting and improper reporting of bitcoin. In our January post, we first discussed a John Doe summons that the Service had served on Coinbase, Inc., the San Francisco company that handles most bitcoin and ethereum transactions. The summons sought broad information on user accounts.
In March, the IRS asked a federal court to force the company to turn over the requested records so it could ensure that taxpayers were not using virtual currencies to avoid paying taxes.
Coinbase requested that the court quash the summons a couple months later. Then, three lawmakers who sit on tax policy committees became involved. They sent a letter to the IRS Commissioner expressing concerns about the scope of the summons.
The IRS has since limited the scope to users with “at least the equivalent of $20,000 in any one transaction type (buy, sell, send or receive) in any one year during the 2013 – 2015 period.” The Service is asking the company to turn over identification information for users who fall into this category, including “account opening records, copies of passports and/or driver’s license, all wallet addresses, and all public keys for all accounts/wallets/vaults.”
Reporting virtual currencies
Virtual currency is treated by the IRS as property, which means the sale of a bitcoin can trigger capital gains or a loss. But with the fluctuating value it can be difficult to properly report bitcoin transactions especially when purchasing or buying lost of small items with bitcoin.
If you have invested in bitcoin or use it as part of business/personal transactions, speak with a tax attorney for a review of past tax returns and advice going forward.