Local CPA's are dealing with a new challenge as they dig into the annual work of figuring out their clients' tax liabilities. What do you do about Bitcoin?
Senior Accountant Kaylin Carroll at San Antonio's ATKG CPA firm tells News Radio 1200 WOAI you would be surprised how many people in this area have Bitcoin and other 'crypto currencies' in their financial portfolio.
"Its been a huge number, and we're seeing an even larger number of our clients calling and asking questions," she said. "Especially since its been in the news with all the market fluctuations."
Carroll says, essentially, the way Bitcoin is taxed depends on the way its used.
"Trading and exchanging virtual currency are going to be treated as a capital gain. Actually spending the currency or purchasing any goods is going to generate gain as well. But if you received any of the crypto currencies as payment, that will be taxed as regular income to you."
She says taxpayers and accountants will have to figure out how much the crypto currency was worth on the day it was received or tendered, and that can be a challenge, considering the wild fluctuations of Bitcoin during 2017.
She also cautions taxpayers against thinking that because Bitcoin is not traded on normal exchanges, you can hide your transactions from the tax man.
"Its very confusing, because the treatment does very by the type of transaction, and there are not a lot of reporting requirements for the virtual currency transactions."
One exchange, Coinbase, will send a Form 1099 to Bitcoin buyers, but only if more than $20,000 was involved and it was done in 200 or more separate transactions.
Also, if you want to reduce you tax bill by donating Bitcoin to charity, you'll have to find a charity that accepts Bitcoin. If you exchange it for regular money and then donate it, you'll have to pay capital gains taxes on the transaction.