I encourage all who reas this thread to also very closely read the most recnet IRS ruling, posted here:
http://www.irs.gov/pub/irs-drop/n-14-21.pdf?utm_source=3.31.2014+Tax+Alert&utm_campaign=3.31.14+Tax+Alert&utm_medium=email
Regarding self employmjent tax for miners; from the ruling:
"Q-8: Does a taxpayer who mines virt
ual currency (for example, uses computer
resources to validate Bitcoin transactions
and maintain the public Bitcoin
transaction ledger) realize gross income
upon receipt of the virtual currency
resulting from those activities?
A-8:
Yes, when a taxpayer successfully mines
virtual currency, the fair market value
of the virtual currency as of
the date of receipt is includible in gross income. See
Publication 525,
Taxable and Nontaxable Income
, for more information on taxable
income."
A veritable minefield of problems for all!
My $.02.
The IRS will figure out a better way of handling things now that the pressure is off them to define bitcoin. They were being badgered for a response on how to handle bitcoins, and they gave the most logical one they could given their current regs. This is why their latest ruling and QA is so.. ill-fitting.
I am 99.9% sure the IRS has no system in place for crawling the blockchain, linking addresses to real people, or linking transaction times / amounts to bitcoin prices at that time. Hell i doubt they even have a division formed for this. In fact, given their reticence with virtual currencies as a whole, they are at basement level at best.
They do, however, have the ability to waltz into Coinbase through FINCEN links and see how much money people are handling in there. Anyone who has been buy/selling at CB better list that stuff on their tax return.
All of that being said, the IRS has some serious work to do before it tosses anyone in jail...and by extension enough time for Bitcoin proponents to effect changes to the ruling. After seeing how the whole healthcare.gov thing worked out, i believe it is safe to say that we have a good year or 2 before anything becomes usable for the IRS.
