Assault on the Internal Revenue Service continues. Now it is Nina Olson, the National Taxpayer Advocate. In annual report for 2013, presented to Congress she states that to this moment IRS was not able to anyhow clear the rules regarding Bitcoin with its lightning fast spread across the international market and how it must be treated according to the tax laws.

Taxpayer Advocate Service (TAS), which Olson is a head of, takes upon the roles of unbiased spectator, advisor and taxpayers’ representative for IRS due to TAS being an independent institution within it. That way all the taxpayers’ confusion and anger are channeled from TAS directly to IRS.

National Taxpayer Advocate believes that all law-abiding entrepreneurs with businesses that are somehow entangled with digital currency want to play it by the book, but not exactly know how to do it. In her opinion, what also concerns these people is that they could be associated with some criminal activity, because IRS did not proclaimed any official regulation over Bitcoin.

There are several topics that Olson wants to point out.

Main issue is the state tax law that in her opinion will be the hardest riddle to work out. Currently, some states have a law according to which, sellers that are not located in a given state must provide only full sales tax collection if the seller has information about the buyers address. And as we know, the bitcoin transactions themselves do not provide such info.

Another thing that occupies Olson is that bitcoin traders may fail to comply with the Foreign Bank and Financial Accounts Report which according to Wikipedia means that:

“Each person (including a bank) subject to the jurisdiction of the United States having an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in a foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $10,000.[4]"

In short the idea is: if you are a US citizen or resident, you have to inform about your accounts outside the States that hold more than ten thousand dollars.

Olson received support from Senator Tom Carper, who mirrored her opinion on Bitcoin using taxpayers and disapproved the IRS’s inactivity on the concerning matter. Though he was optimistic about the new Internal Revenue Service Commissioner, hoping that John Koskinen “takes these recommendations to heart and acts expeditiously to provide thoughtful guidance to taxpayers regarding the use of digital currencies”.

It has to be mentioned that in 2009 IRS has already published information on the tax compliance risk form virtual economies (including the tax implications of virtual economy transactions) in 2007, even before Olson asked for their assistance on taxes. However, at that time Bitcoin, the father of all cryptocurrencies was still but a shadow of what it is today, an idea thrown into the vasts of internet by a user under a name of Saotshi Nakamoto.

So, if You are a U.S. citizen that has or has interest in working with bitcoins follow the news, something is stirring up here and You don’t want to cross the law, do you? For others don’t slack either, the same thing could start in your own country tomorrow.