Bitcoin Forum

Bitcoins have been out long enough that there must be some tax audits in the US that have involved them.  The way they have been treated and whether or not the auditor chose to question the treatment could be helpful for others to know.  It would also help to state whether the bitcoin activity or income was enough to make the auditor question the matter, and even better, seek advice from his/her manager.

Anyone willing to share their experience?

I highly doubt there's been any

There was a guy who wrote on here recently about an email exchange they has withthe IRS. Unfortunately I think it was a little vague. But I'd look for that thread. Within the last 30 days.

He will soon post as the first guy to get audited

I don't doubt that the matter has come up on an audit.  For most, the amount will likely not be material.  But with the current movement in price.... things may be different.  It will be interesting to see what a field agent does with this.  They may or may not seek advice from another and they may simply choose not to challenge the treatment on the tax return.

When it is brought up, it will be helpful to have some information on how it was treated by another revenue agent in the field and possibly their superiors.  No agent will be bound by this but it surely can't hurt.

I'm not sure what the value would be. My understanding: IRS Manuals are quite explicit that the results of any given audit are inapplicable to any other - they explicitly do not set precedent.

Disclaimer: I'm Just Some Guy on the Interwebz.

You are correct in theory, jbreher, but absent any authority at all, many will appreciate knowing how another has dealt with the situation.  Even where the IRS Office Of the Chief Counsel issues an opinion that they say is not to be used as precedent... it is.  It is not surprising to see that same opinion showing up in a later court case cited by a judge, even a Tax Court Judge, who uses it for guidance....... making the distinction between 'precedence' and guidance a pretty thin line.

Since we have no guidance right now from the IRS, it would help to see the various ways auditors have approached the matter.......

I'm thinking that the first hundred or thousand bitcoin audits, both the taxpayer and the agent will be fumbling around in the dark. Once I have taxable events due to bitcoin transactions, I'll claim them in the most advantageous manner possible - as long as I have decent rationale for doing so.

I get puzzled by people who try to underclaim in order to avoid getting audited. Firstly, one is not legally bound to pay any more in tax than the very minimum one is legally required to pay. For another, I don't think underclaiming typically leads to a lower chance of getting audited.

But bottom line, why would you not claim the most advantageous plausible regime? It's not like the auditors are gods. Sure they weied  wield some power, but they don't make law, nor regulation, nor even policy. If you can plausibly argue why your view is correct, they might rule in your favor. If not, there is a process for appealing their decision. It's not like you'd be arguing against widespread precedent.