Bitcoin and the IRS

irs2Last month the GAO, Government Accountability Office, produced a report on ‘Virtual Currencies’ and tax compliance. The report urges the IRS to look into the use of virtual currencies and release guidelines on taxation of income earned via these currencies.

The report correctly notes that virtual currency transactions are similar to cash or barter transactions. There are no third parties involved whose responsibility it is to report the transaction and transactions of this sort making “underreporting, mischaracterization, and evasion” much easier.

This does signal that the IRS will be keeping a closer eye on the Bitcoin economy, but there is nothing terribly surprising here; the IRS wants a share of your income…however you earn it.

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Forbes: FATCA Makes Foreign Banks Report Americans

FATCA or the Foreign Account Tax Compliance Act was enacted in March 2010 to improve tax compliance involving foreign financial assets and offshore accounts. The law requires foreign banks to report U.S. account holders to the IRS and in 2014 the IRS will start penalizing foreign banks for failing to comply.

Forbes’ Robert W. Wood explains that this could have serious consequences for Americans living abroad.

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