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Bitcoin: What Accountants Need To Know

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This presentation will help accountants and CPAs know the basics about Bitcoins before they get caught up in the hype.

Published in: Economy & Finance

Bitcoin: What Accountants Need To Know

  1. 1. Bitcoin: What Accountants Need To Know
  2. 2. 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
  3. 3. It is now a frequent point of discussion among businesses and investors. 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 about it. Let’s start.
  4. 4. #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 bank. 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.
  5. 5. #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.
  6. 6. #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
  7. 7. #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.
  8. 8. What IRS wants you to Know about Bitcoins - • 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 currencies.
  9. 9. 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 Well-Understood
  10. 10. About Us Ace Cloud Hosting is an Intuit authorized Premier Reseller and commercial host for QuickBooks software and a leading tax software hosting provider to CPAs, bookkeepers, startups and SMBs. As winner of 2016 Accountex USA User Favorite Awards for hosting category, we provide secure cloud accounting solutions and hosting of software such as Lacerte, Drake, ProSystem fx Tax etc. that enable startups and SMBs to run their whole accounting better. Visit us at www.acecloudhosting.com or call us at +1-855-219-0431
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  12. 12. References 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 Image Credit: Pixabay.com, Pexels.com, and Unsplash.com

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