What Accounting Firms in Albuquerque need to know about Bitcoin?

What Accounting Firms in Albuquerque need to know about Bitcoin?

“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. Bitcoin is open-source so its design is public. Nobody owns or controls Bitcoin and everyone can take part.”

-Bitcoin.org

According to guidance issued by the IRS on March 25, 2014, Bitcoin will be treated as property for federal tax purposes.

Virtual or digital currencies were described at a 2013 Senate hearing as a legitimate financial service with the same benefits and risks as other online payment systems. These are also known as crypto-currencies and many non-profits and small business are beginning to accept them as forms of payment.

By using a crypto-currency such as Bitcoin, small businesses are capable of reducing their payment processing costs. Processing a credit card, on average, costs 3% per charge, whereas Bitcoin is under 1%. This cost difference will most likely lead to changes in domestic credit card fees, as they try to stay competitive with Bitcoin’s lower fees.

Another benefit Bitcoin will have on small businesses is that it is more accessible to customers worldwide than PayPal. Using Bitcoin, a small business has the option to market products and services on a more vast and global scale.

On the down side; The SEC is currently advising investors to use caution when considering Bitcoin-related investments. These investments often come with high chances of investment fraud.

The SEC issued a public statement regarding Bitcoin and its associated risks:

1.     There are no insurance protections.

2.     There is a history of volatility (Bitcoin exchange rates have fluctuated up to 50% in a single day).

3.     Bitcoins are not legal tender, therefore federal, state, or local governments may restrict the use and exchange of Bitcoins.

4.     Concerns regarding fraud, glitches, hacking, malware, and theft.

5.     Bitcoin is a relatively new invention and there are no long-term records about its reliability or stability.

According to CPA Magazine, CPAs need to be prepared to provide proper information for clients regarding ever-changing payment technologies. Here at Hinkle + Landers, PC, our CPA’s are well-versed and stay up-to-date on all IRS and monetary topics.