Project Description

The use of bitcoin and other virtual currency has increased in recent years. It is estimated that over 80,000 businesses now accept bitcoin, including mainstream companies such as Overstock.com, 1-800 Flowers, and Dish Network. Tax practitioners can expect to see an increased number of clients involved in bitcoin transactions, and they need to understand how bitcoins are taxed to properly advise their clients. This Practice Alert (excerpted from a more extensive article in the December 2014 issue of Practical Tax Strategies ¶  12201403 ) reviews the current tax rules for bitcoin transactions and discusses how the IRS faces a significant challenge in enforcing the reporting and collection of tax in bitcoin transactions.