Virtual Currency & Taxation Part 1 (4/4)


Now, we’re going to talk a little bit about–
I call this Bitcoin around the world. Let’s see who is accepting Bitcoin these days. Now, this is the smallest, and it grows every
day. More and more companies will let you pay in
Bitcoin. I think at some point, it’s going to become
more the standard than not. It is legal in most countries on this planet. This is just a quick list of nations that
have it, it’s not illegal. It’s not their fee currency but it’s not illegal. We’re in here, it’s legal in the United States. There’s a very small handful of countries
who have banned it. A couple of these countries have banned it
because they’re going to create their own. They don’t want Bitcoin to be competing with
the national virtual currency that they’re going to create. In particular, China. China is developing its own form of cryptocurrency
and it has made Bitcoin illegal as kind of a preliminary step to having its own cryptocurrency. Russia’s central bank has stated that it’s
time for us to develop our own cryptocurrency. Now, Japan actually has legally classified
Bitcoin as a form of payment. It has licensed exchanges so, Bitcoin is very
much in the forefront of cryptocurrency. They’ve even said that they’re going to work
towards the healthy development of the cryptocurrency industry within Japan, and on a global scale. That’s very nice. The Europeans also accept Bitcoin as a legal
form of payment. First, Lenders declared Bitcoin to be a foreign
currency, and you might ask them of which country [laughs] nobody knows. Bitcoin is sold in railway station kiosks,
it’s readily available. Taiwan Bitcoin is sold in convenience stores. There are many other countries where Bitcoin
is much more part of daily life of say, than here in the United States. Canada is looking into creating its own cryptocurrency. Again, when I say cryptocurrency, we’re just
talking about blockchain technology. Ecuador, proposing to do the same, South Korea,
Ukraine has this national project called cashless economy, and they’re considering developing
their own cryptocurrency as a part of that, and on and on it goes. I think what we’re seeing here is a really
massive evolution in the financial world toward blockchain technology. As time prepares, at this point, there are
a lot of questions that are coming up for us. For example, if I have a client who comes
in, and he sells virtual currency, how do I report that? If I have a client who comes in and says,
“I’ve traded bitcoin for ethereum.” How do I report that? These are important questions. Now, you know virtual currency has been around
since 2009, 2010. It certainly started taking off by 13, and
as of recently 2013, the IRS has given us no guidance whatsoever on how to handle these
virtual currency transactions. What actually finally kicked the IRS off to
do something was that the United States government accountability office published a report to
the finance committee, and this for the US Seven. The report was called virtual economies and
currencies additional IRS guidelines could reduce tax compliance risks. [laughs] Yes, you think. What was interesting about these reports is
actually fascinating reading. The reports spend as much time on the question
of the taxation of assets purchased or sold, or online gaming was a major topic, as well
as Bitcoin. The IRS responded in 2013 saying, “Yes, we
know it’s a problem, too bad we don’t have the manpower to address it.” In the same year the taxpayer advocate service
addressed the same question in it’s 2013 annual report to Congress saying the IRS lack of
guidance was leading to serious compliance problems. Finally, in 2014 the IRS issued six pages
column, six pages of guidance. In April 2014, it was IRS 2014-21, and the
guidelines and the reporting requirements that it created raised very serious concerns
in the virtual currency community. The guidelines recognized, “There may be other
questions regarding tax consequences of virtual currency not addressed in this notice that
were in consideration, and please let us know what those may be.” This IRS is known as 2014-21 is the substance
of what we’re going to talk about in part two. Part two is where the rubber really meets
the road in terms of how do I create a tax return when a virtual currency user comes
into my office and says, “Hey, guess what? I have virtual currency income, what do I
do?” That’s the question you are going to be asked. That’s the question that we’re going to address
in great detail in part two, and I look forward to seeing you there. Now, why should you use tax prepared care
about virtual currency? There is a serious under-reporting problem
going on. Coin-base which is one virtual currency exchange
in the US one holds 35 million wallets. 35 million. How many people reported a virtual currency
transaction in their tax returns? In 2013, 807, in 2014, 893, in 2015, 802 and
I think it’s the same 800 people over and over. [laughs] I don’t think it’s 2400 people, I
think it’s 800 people. We’ve been operating under this idea in tax
world that I don’t really want deal with it. I’m not going to ask about it, and no one
will tell me and things will be good. You know that we can’t work like that. The tax payers that I’ve spoken to who were
trying to avoid it, have just told me outright, “It’s too confusing I don’t understand it,
I don’t want to deal with it.” That’s not how we can operate it. It has 230 practitioners, and we all know
that. We need to be proactively asking clients about
their virtual activities, virtual currency activities, and educating them on how to report
these activities. What kind of record keeping is going to be
required of them. That’s what we’re going to talk about in part
two of this course so that you will be after that course ready to go, and help virtual
currency taxpayers. I’ll look forward to seeing you then. Thank you. We do hope that you join us for our part two. As you can see on this screen, there is a
couple resources that we wanted to make you aware of. Just some things that we hope that you’re
aware of, we hope that you’ve enjoyed this introductory course. There’s a lot of information, and this is
definitely a new field of study and a new area of taxation for a lot of people so, we
appreciate you coming and learning with us on this. As Amy mentioned, we are going to have not
only a part two and part three on this course. Part two will focus, as she mentioned just
now, on more of the technical-specific things of gifting, of inheriting, claiming losses
and selling. There’s really a whole lot of taxable events
that will get incurred when you’re dealing with virtual currency. That part two course is going to be a two-hour
course that is going to cover all those different aspects and different considerations that
you might have for your tax payers that you are working with. Additionally, part three is going to go into
more of the upcoming IRS regulations. Some of the telegraphing and the things that
are going to becoming on the pipeline as far as changes, as well as dealing with different
types of clients. In Amy’s experience, she’s separated them
out in four different types of clients, and ways that those folks– Excuse me, I guess
ways that those clients differ on there. Again, we appreciate you taking that time
but wanted to just get those plugs in for there as you’re considering those. As a sign of that, intermediate course is
going to be a two-hour course. Be for two CPE credit hours and part three
is going to be another one-hour course, and we’ll be updating these as well. You can also find Amy on the community as
well which she will be posting now, and other discussion points will be happening. Thank you so much, Amy, and last thing, if
we have people that want to get hold of you as they can see on the screen, we’ve got your
email and your website. Is that the best way to get hold of you if
they have a question like, “I’ve got $1 million in gains, and I need to figure out how to
work through this case. How do I actually do what I am doing?” Absolutely. I’m very easy to reach. My email address- and that’s the best way
to reach me- is Amy [email protected] Tucson, by the way, is spelled T-U-C-S-O-N
like Tucson tucsontaxteam.com, and certainly, I’m very happy to help. Wonderful. Thank you so much for that, and thank you
for being a part of the session today. We hope you’ll join us on part two and three. We look forward to seeing you in the future
on those sessions.

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