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Bitcoin is going mainstream today. Its rise in 2017 has stolen
the investing spotlight. Analysts predict that bitcoins are
going to see an exponential growth in 2018, too.
Data Source: Bitcoin.com, December 2017
It is now a frequent point of
discussion among businesses and
And as an accountant, you should
know all about this digital-currency.
Because despite all the debates,
questions and media coverages,
chances are you are still clueless
#1. Bitcoin is a Digital Currency
Bitcoin is a payment network and a
digital currency that can be transacted
as well as transferred directly from
person to person via the Internet without
going to any central authority such as a
Bitcoin is open-source technology and
anyone can take part from anywhere.
It’s also important to know that no
central authority such as banks or
government owns or controls Bitcoins.
#2. Bitcoins Mining and Blockchain
Bitcoin mining is a process in which a
miner uses special software to process,
verify and secure bitcoin transactions.
This process involves adding
transactions to a public ledger of past
transactions, known as Blockchain. The
Blockchain also works as a check-
clearing system that ensures that the
transaction has taken place in reality.
Blockchain technology is based on
triple-entry accounting, which removes
the need for transactions to be
processed by a financial institution.
#3. How Secure are Bitcoins
Bitcoin is a cryptocurrency that uses
Cryptography to create and transfer
bitcoins. It prevents any tampering and
double spending of the currency.
Blockchain helps ensure the
transparency and verification of
transactions happened in reality, which
helps making Bitcoin network
transparent, safe, error-free and stable.
However, bitcoins are stored in a digital
wallet once they are received. These
wallets require additional security such
as a 2-factor authentication and backup
to protect the value of bitcoin.
Image Credit: Hongkiat
#4. Bitcoins and Taxable Income
Bitcoin miners and investors are
required to report all income from
bitcoins as a taxable income.
IRS guidelines treat bitcoins as a
property, which means accountants
must make sure to file all bitcoin
transaction details of their clients while
preparing the W-2s and 1099-MISCs.
What IRS wants you to Know about
• Wages paid to employees using bitcoins are taxable to
the employee, must be reported by an employer on a
Form W-2, and are subject to federal income tax
withholding and payroll taxes.
• Payments using virtual currency made to independent
contractors and other service providers are taxable and
self-employment tax rules generally apply.
• The character of gain or loss from the sale or exchange
of virtual currency depends on whether the virtual
currency is a capital asset in the hands of the taxpayer.
• A payment made using virtual currency is subject to
information reporting to the same extent as any other
payment made in property.
For further details, check out this IRS guideline on virtual
The growth of bitcoin is not going to
stop and more people will start
buying or selling bitcoins to do
transactions with it.
We can expect that this disruptive
innovation will transform the way
accounting functions and also, how
accountants spend their time in
preparing reports on virtual currency
for their clients.
Bitcoins Should be
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Also Check Out Some of Other Slideshares.....
IRS Virtual Currency Guidance - IRS
Some Things You Need to Know About Bitcoins – Bitcoins.org
What Accountants Need to Know About Bitcoin – Maryville University
What Accountants Need to Know About Blockchain – Accounting Today
Getting Started With Bitcoin: Your Digital Wallet – Ace Cloud Hosting
Blockchain: All That It Has To Do With Your Accounting – Ace Cloud Hosting
IRS Bitcoin Rule: 5 Things Accountants Need to Know – CPA Trendlines
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