In 2018, Ohio became the first state to allow citizens to pay taxes using bitcoin. A website called OhioCrypto.com was launched for that matter. However, this has not been welcomed all over the US yet. Using this virtual currency has its perks. But it also comes with some added troubles because of it being so susceptible to hacking and unauthorized access.
Currently, the IRS does not accept tax payments by bitcoins directly. A company named Snapcard lets its clients make digital transactions with bitcoins. But those who use bitcoin to pay taxes are charged with service charges and capital gain taxes. Capital gain taxes are charged because bitcoins are treated as capital assets, and any profit earned by transacting using capital assets is subject to taxes. In case of loss, it can reduce the amount of tax as well.
The advantages of using bitcoin include fast and easy transactions. But it has certain risks associated with it as well. These risks compel the policymakers to think back and forth about the acceptance of taxes with bitcoin all over the US.
Firstly, the bitcoin market is extremely volatile since it does not have any central authority. The prices keep going up and down unpredictably. Secondly, bitcoin transactions are at high risk of hacker attacks. Many organizations, such as Bitstamp and Mt. Gox, experienced a heavy loss of money due to hacking.
The future of bitcoin is always making circles in different news media. Is it a wise choice to make important transactions such as taxes with bitcoin? Well, the answer is still a blur. Its unique technology makes it difficult to be certain about its future.