bitcoin - passing fad? disruptive technology? either way it's now taxable!

Photo: Flickr BTC Keychain

Bitcoin: Passing Fad, Disruptive Technology? Either Way, It’s Now Taxable!

Tom Hood, CPA, CITP, CGMA

Tom Hood, CPA, CITP, CGMACEO

MACPA www.macpa.organdBusiness Learning Institute (BLI) www.blionline.org

http://www.linkedin.com/in/tomhood/

If there is a conversation about the future of the profession, you're bound to hear Hood's name mentioned as one of the people leading the way.

– Accounting Today Magazine

• Named the Second Most Influential in Accounting by Accounting Today Magazine 2013

• Linked-In Top 150 Influencer• Top 25 Influencers in Learning & HR by HR

Examiner• Top 25 Thought Leaders in Public Accounting

by CPA Practice Adviser• Working on Learning Management with

AICPA/CPA2Biz, Cloud Curriculum, Performance Management

4 Careers Bitcoin can Disrupt

• Bankers• Cashiers• Armored Car

Drivers• Accountants

Is Bitcoin a bubble?

Source: CoinDesk

Closing Price $817.12 as of Dec 30, 2013

Bitcoin Theft Makes Headlines

Bitcoin hit new low of $557.40 on news of Mt. Gox (Japanese) Bitcoin Exchange theft of Bitcoins.

More Bad News:Apple removes Block Chain from App Store

Bitcoin Price 3/30/14

Down 43% since year-end

Source: CoinDesk

How a Bitcoin Transaction Works

Source: PC World – 7 Things You Need to Know About Bitcoin

How Bitcoins are Circulated & Used

Source: GAO Report

Bitcoin Transaction Documentation

Source: Bitcoin: A Peer-to-Peer Electronic Cash System

Could this replace the general ledger for documenting transactions?

Congress, GAO, FBI, and TreasuryStudy Virtual Currencies

Congress started studying the economic and tax issues with a hearing by a Joint Economic Task Force on April 1, 2008 to the GAO report on May 15, 2013. The FBI, Treasury and the National Taxpayer Advocate all were investigating the fast growing economies of virtual goods and virtual currencies that started with World of Warcraft & Second Life.

IRS Issues Virtual Currency Guidanceon March 25, 2014

Three Types of Virtual Currency Systems

Source: GAO Report

Generally not taxable Most likely taxableCould have taxable issues

Virtual Currency Tax Issues

1.Taxpayer lack of knowledge about tax requirements

2.Uncertainty over how to characterize income3.Uncertainty over how to calculate basis for

gains (capital gains / barter)4.Challenges with third-party reporting (1099s)5.Evasion

Source: GAO Report

7 Things to Know About Bitcoin1. Bitcoins are created, traded and

controlled by the people2. We’re definitely in a Bitcoin bubble3. You can mine Bitcoins but the gold rush is

over4. Most major retailers don’t accept

Bitcoins5. Bitcoins aren’t protected or insured by

anyone6. Nobody knows who really created Bitcoin7. Bitcoins aren’t the first virtual currency

and won’t be the last

Source: PC World – 7 Things you need to know about Bitcoin by Alex Wawro