GAO: Taxing Bitcoin

Following up on my previous post, The IRS Takes a Bite Out of Bitcoin (May 2, 2013): GAO, Virtual Economies and Currencies: Additional IRS Guidance Could Reduce Tax Compliance Risks (GAO-13-516):

Recent years have seen the development of virtual economies, such as those within online role-playing games, through which individual participants can own and exchange virtual goods and services. Within some virtual economies, virtual currencies have been created as a medium of exchange for goods and services. Virtual property and currency can be exchanged for real goods, services, and currency, and virtual currencies have been developed outside of virtual economies as alternatives to government-issued currencies, such as dollars. These innovations raise questions about related tax requirements and potential challenges for IRS compliance efforts.

This report (1) describes the tax reporting requirements for virtual economies and currencies, (2) identifies the potential tax compliance risks of virtual economies and currencies, and (3) assesses how IRS has addressed the tax compliance risks of virtual economies and currencies.

• Accounting Today, IRS Could Begin Taxing Bitcoin and Other Virtual Currencies
• The Hill:  GAO: IRS Needs to Keep an Eye on Virtual Currencies
• National Journal:  The Tax Man Cometh—For Your Bitcoins