IRS revenue officers have recently completed training provided by the US Financial Crimes Enforcement Network (FinCEN) regarding Bitcoin – the online monetary system. The agency has jurisdiction over Bitcoin, and is working with IRS to ensure that Bitcoin “virtual currency exchangers and administrators are meeting their compliance obligations under the applicable rules”.
The IRS and FinCEN are concerned about the use of Bitcoin to avoid taxes, and to conduct illegal money laundering and in some cases fraud. The speed and paperless environment surrounding mobile financial transactions, social technologies and the increasing use of Bitcoin and other virtual currencies concerns the US governement, and in particular, the IRS.
US taxpayers who attempt to use Bitcoin and other virtual strategies to conduct transactions, move financial resources or otherwise avoid taxable events should proceed with caution. The IRS and FinCEN are paying close attention, and cooperation with international sovereign tax authorities and offshore virtual currency houses is designed to remove “safe havens” and bring more transparency to international and virtual financial transactions.
Stepped up training for IRS revenue officers will be followed with increased risk for an IRS audit, and focused reporting requirements for those who utilize Bitcoin. If you are concerned about the taxable ramifications of virtual transactions or have been contacted for an IRS audit we invite you to call for a free consultation at 866-631-3470.