Finance & Enjoyment Blog

Denver CPA Asks, What’s The Deal With The Bitcoin?

Bitcoin, the virtual currency, has been receiving a lot of attention around the world over the past five years. Bitcoin brands itself as an “open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part in it.” Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Your Denver CPA and personal wealth management partner has the background on this currency.

Paying for something with a Bitcoin is similar to a digital wallet. Just as a physical wallet holds paper money, a digital wallet stores the private software keys that are bitcoins. It makes or receives payments by communicating with the network or other Bitcoin wallets. Now that you know the background of how Bitcoin works, the real question is, is Bitcoin a viable currency and is it worth your investment?

It’s still a question whether Bitcoin will make it as a currency. The IRS has provided some regulatory clarity when it announced recently that it will treat Bitcoin holdings as property rather than as a currency for tax purposes. Payments made in bitcoins are subject to the same information reporting requirements as any other payments in property, and wages paid in Bitcoins must be reported on a W-2 form and are taxable as income.

Investing in Bitcoin has been a wild ride for investors. In April 2013, after rising from $90 to $260 over two weeks, a bitcoin’s value decreased to $130 in just six hours, according to BBC News on April 11, 2013. Many proponents of bitcoins argue that Bitcoin should be regarded as a major player in the currency landscape because the virtual currency facilitates global commercial transactions.

How to use this Information

There’s a lot of speculation about the Bitcoin as a currency and as an investment. If you’re interested in hearing more about Bitcoin’s impact on your taxes or your investments, please contact us at 303-815-1100 or visit our website today.

What are your thoughts on the Bitcoin?

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