Yes, You Have to Pay Taxes on Cryptocurrencies

Bitcoin is a revolution. Bitcoin is ridiculous. Bitcoin is the future of money. Bitcoin is a predictable bubble. Whatever you think of cryptocurrencies, you've probably been hearing about them over the last year or so. And while many are organized around principles of privacy and anonymity, there's one agency they're not evading: the Internal Revenue Service.

While Bitcoin and its fellow trailblazers consider themselves currency, the IRS actually sees it differently. Since you have to sell a Bitcoin (or a fraction of one) in order to make purchases with it, the government considers a Bitcoin property rather than money. That means capital gains taxes, which means even if you nab a small Americano at a Bitcoin-accepting coffee shop, you'll need to file paperwork.

This is where things get tricky, since the IRS hasn't commented on taxing cryptocurrencies since 2014, and Bitcoin in particular has changed tremendously since then. If you've made lots of transactions or a notably large purchase with cryptocurrency, it may be time to check in with an accountant. You'll want to keep track of your gains and losses, and can start with online services like CoinTracking or BitcoinTaxes. Some accounting firms have partnered with these websites to import price-tracking data directly into a tax form.

Your accountant may point out that the American Institute of Certified Public Accountants has requested more clarity from the IRS on taxing cryptocurrencies, and it may be a while before that comes. If you're impatient to file, consider putting together a statement detailing what you used the Bitcoin for and when you made your transactions. While cryptocurrency fans blaze into the future, the rest of the world needs as much good information as it can get to catch up.