Bitcoin: Why the IRS cares about an intangible currency

You probably are among the vast majority of people who have never used it. But perhaps you have heard about it. And you can be sure that you will be hearing more about it going forward.

We're talking about a Bitcoin. And the reason it's sure to be garnering a lot more public attention is that it is already starting to get scrutiny from top lawmakers in Washington, D.C.

As evidence, we point to the fact that leaders of the Senate's Homeland Security and Governmental Affairs Committee let government financial regulators and enforcers to make clear how they intend to track what's happening with Bitcoin and other virtual currencies that are developing in the Internet realm.

If tracking is here, you can be sure that tax collection by the Internal Revenue Service will follow, highlighted by stressful IRS action requiring effective solutions from experienced legal counsel. For the uninitiated, here's a little glimpse into the Bitcoin world. 

By now you grasp that a Bitcoin is virtual currency. That is, it exists only as a code on a computer, but it works like cash. It can be used to buy products and services. It got its start back in 2009 in the midst of the Great Recession when everyone was asking whether anything was worth anything anymore.

Today, a Bitcoin market worth $1.2 billion exists and that’s what has officials worried. To tap into the market, a buyer has to buy a Bitcoin with real currency. Once that cash enters the virtual world, though, it becomes unregulated. And that's where state and federal regulators get worried, because that means Bitcoins might be used to launder money, sell illegal products, commit fraud or evade taxes.

The Securities and Exchange Commission is already conducting an investigation into an alleged Bitcoin Ponzi scheme. The General Accountability Office has also suggested to the IRS that it develop guidance on how taxpayers should go about reporting their digital currency holdings.

Backers of the Bitcoin market don't necessarily object to regulation, but they say the market is at such an early stage of development that they worry that ham-fisted oversight might squash it before it has a chance to take hold.

Source:, "Decoding Bitcoin," Zachary Warmbrodt, Aug. 16, 2013 

Email Our Team

Contact Us to Get Started Today

Located in the Washington, D.C area, we serve clients in the District of Columbia, Maryland and Northern Virginia, as well as across the country and overseas. For a free initial consultation, call 202-381-1261 or complete our brief online form.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Six Convenient Office Locations in and around the DC Metropolitan Area

Washington, D.C.
1050 Connecticut Ave NW #500
Washington, D.C. 20036

Phone: 202-618-1873
Fax: 888-235-8405
Washington Law Office Map

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Columbia Law Office Map

Annapolis Office
839 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Annapolis Law Office Map

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 202-618-1873
Phone: 703-988-4817
Fax: 888-235-8405
Fairfax Law Office Map

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 202-618-1873
Phone: 240-599-5009
Fax: 888-235-8405
Rockville Law Office Map

Baltimore Office
400 East Pratt Street
8th Floor
Baltimore, MD 21202

Phone: 202-618-1873
Phone: 443-743-3381
Fax: 888-235-8405
Baltimore Law Office Map