Reported initially by NextGov, the federal auditing committee, Government Accountibility Office (GOA), has recommended to the IRS not to create regulations for the taxation of bitcoin related profits. The GOA stated the IRS has “neither the money nor the time” to create rules related to bitcoin tax collection.
The GOA study is part of a report titled “Virtual Economies and Currencies”. The GOA explained that the research was due to the recent rise of virtual currencies being used as a medium for the exchange of real goods. As they stated:
“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.”
How to Generate Leads Outside of the Box?Go to article >>
The report covers various forms of virtual currencies, including ‘closed flow’, ‘hybrid’, and ‘open flow’ structures. Closed flow currencies are products that are only available for trading of goods within on environment. They have a virtual value and can’t be cashed out for fiat currencies. In hybrid formats, the virtual currency can be acquired with dollars, but there is no guarantee of an exchange of the virtual currency back into dollars. Open flow currencies are virtual products that are being freely exchanged and being used to exchange both real and virtual goods.
In its section of open flow currencies, bitcoin was featured prominently, with an explaination of what bitcoins are and how they are used as a payment item for real goods.
In its conclusion, the GOA recommended that the IRS find a “relatively low-cost” way to provide tax reporting information of virtual currencies for taxpayers to learn the rules.