American journalist and podcaster David Seaman posted a scathing critique of the IRS’s newly announced stance on Bitcoin earlier this week. The IRS has said it will be taxing Bitcoins, and any other digital currencies, as property.
In his post on Medium, called “The US Government’s Vendetta Against Bitcoin is Unacceptable,” Seaman says Washington’s position is going to undercut America’s ability to innovate in the cryptocoin space, and some other countries are going to take the lead.
“Miners are subject to the self-employment tax,” he writes. “Are you kidding me? Running a program on your computer makes you self-employed?
“I guess every Halo player is now a military contractor, by the same logic.
“Bitcoin is now treated by the IRS as physical property, making it all but useless within the United States as a functioning transactional medium, especially for small everyday transactions.”
He went on to compare the position similar to if the IRS had charged property taxes for URLs in the ‘90s. Then, he takes the government’s position to its logical conclusion:
“And by extension, isn’t the NSA committing physical theft every single day?
“There’s also the fact that the highest levels of leadership within the US government, including November’s Senate hearing on digital currencies, have always referred to Bitcoin as an ‘electronic currency’ or a ‘virtual convertible currency’ in the case of the Treasury Department.
“They’ve never referred to it as ‘electronic property’— this is a vicious bait and switch.”
You can (and should) read the full post here.
Further Understanding of the IRS’s Position
San Diego-based tax attorney Tyson Cross took to Reddit this week to explain what the IRS’s new classification of Bitcoin means to each user who is obliged to pay US taxes.
Here are his 5 main points:
Bitcoins are property, not foreign currency.
Every bitcoin transaction is taxable.
Miners recognize income in the year the bitcoin is mined.
Miners are subject to self-employment tax if their activity rises to the level of a trade or business.
The IRS Notice is retroactive.
You can read that post here.