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Do you know how IRS treats Bitcoin?

If your business deals in Bitcoin, be advised that the IRS treats virtual currency as property for U.S. federal tax purposes.  General tax principles that apply to property transactions apply to transactions using BTC. 

Wages paid to employees using virtual currency are taxable to the employee. All wages must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes. Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Payers must issue Form 1099 for payments exceeding annual payment of $600 per consultant.

The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer. A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. 

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