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

Network intrusion / Stolen credentials

85M User Accounts Compromised from Video-sharing Site Dailymotion

See threatwatch report

JOIN THE DISCUSSION

Close [ x ] More from Nextgov
 
 

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

  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • 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.

    Download
  • PIV- I And Multifactor Authentication: The Best Defense for Federal Government Contractors

    This white paper explores NIST SP 800-171 and why compliance is critical to federal government contractors, especially those that work with the Department of Defense, as well as how leveraging PIV-I credentialing with multifactor authentication can be used as a defense against cyberattacks

    Download
  • Toward A More Innovative Government

    This research study aims to understand how state and local leaders regard their agency’s innovation efforts and what they are doing to overcome the challenges they face in successfully implementing these efforts.

    Download
  • From Volume to Value: UK’s NHS Digital Provides U.S. Healthcare Agencies A Roadmap For Value-Based Payment Models

    The U.S. healthcare industry is rapidly moving away from traditional fee-for-service models and towards value-based purchasing that reimburses physicians for quality of care in place of frequency of care.

    Download
  • GBC Flash Poll: Is Your Agency Safe?

    Federal leaders weigh in on the state of information security

    Download

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