The IRS has officially stated that bitcoin is a property – similar to any other valuable commodity – rather than a currency. What does this mean? Not much. In short, if you pay someone in bitcoin – in the same way you could pay them in gold – the wages are taxed accordingly. It is also not considered legal tender but a capital asset.
The key line is here: “A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.” Furthermore:
We will have more on this ruling as we approach tax lawyers and accountants who may have to soon deal with a new cohort of the “bitcoin rich.” The entire release follows below.
Illustration by Bryce Durbin