Item 5: Brace for new work.
By Hitendra Patil
You may need to start asking your clients about Bitcoin. New IRS guidance treats Bitcoins and other crypto-currencies not as money, but as property, for tax purposes and applies immediately to all returns. See the full text of Notice 2014-21 (PDF).
Among other things, the IRS advised that:
- As an employer, if you pay wages in Bitcoins:
- You must report it on a W-2.
- You must ensure income tax withholding.
- You must ensure payroll taxes deduction.
- If you pay contractors and service providers in Bitcoins, such payments are taxable and self-employment tax rules generally apply.
- If you make a payment of $600 or more in a taxable year to an independent contractor for the performance of services, you are required to report that payment to the IRS and to the payee on Form 1099-MISC, Miscellaneous Income.