recommended reading

Auditors and IRS Pan Tax Regulations for Bitcoins

Flickr user zcopley

Federal auditors are recommending that the Internal Revenue Service not issue regulations for taxpayers on filing returns for the money earned through the exchange of virtual currencies, such as Bitcoins. 

The tax agency has neither the money nor the time to craft compliance rules for the emerging market, according to a new report from the Government Accountability Office.

Bitcoins -- which are not government-backed -- can be traded for real products and services or traditional currency, including dollars. 

GAO officials acknowledged the government might be missing out on tax revenue as a result of not publishing Bitcoin-specific rules, but it is unclear how much. “Given the uncertain extent of noncompliance with virtual currency transactions, formal guidance, such as regulations, may not be warranted," the auditors concluded. 

The tax agency has not provided taxpayers with information on virtual currencies “because of other priorities, resource constraints, and the need to consider the use of these recently-developed currencies," GAO officials explained.

Instead, for the time being, the IRS has agreed to post information on its websites linking to existing guidelines on bartering, gambling and hobby income, agency officials wrote in a May 3 letter responding to a draft report.

Steven Miller, IRS deputy commissioner for services and enforcement, stated: The IRS "is aware of the potential tax compliance risks posed by off-shore and anonymous electronic payment systems, and we are working to address these risks.”

Discussions with other federal agencies, new training for IRS professionals, and the creation of questionnaires for agents examining returns are under way, Miller added. 

Bitcoin trades, which are hard to trace online, have come under scrutiny at other regulatory agencies, such as the Financial Crimes Enforcement Network, which looks for signs of money-laundering. 

(Image via Flickr user zcopley)

Threatwatch Alert

Stolen laptop

3.7M Hong Kong Voters' Personal Data Stolen

See threatwatch report


Close [ x ] More from Nextgov

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • It’s Time for the Federal Government to Embrace Wireless and Mobility

    The United States has turned a corner on the adoption of mobile phones, tablets and other smart devices, outpacing traditional desktop and laptop sales by a wide margin. This issue brief discusses the state of wireless and mobility in federal government and outlines why now is the time to embrace these technologies in government.

  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

  • A New Security Architecture for Federal Networks

    Federal government networks are under constant attack, and the number of those attacks is increasing. This issue brief discusses today's threats and a new model for the future.

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

  • Software-Defined Networking

    So many demands are being placed on federal information technology networks, which must handle vast amounts of data, accommodate voice and video, and cope with a multitude of highly connected devices while keeping government information secure from cyber threats. This issue brief discusses the state of SDN in the federal government and the path forward.

  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.


When you download a report, your information may be shared with the underwriters of that document.