How do you tax bitcoins? Apparently, not even the IRS knows.

Internet forums like Reddit and bitcointalk.org are exploding with questions about how users of the increasingly popular virtual currency should fill out their tax forms this year.

“Some of us have sold some for fiat [money]. Some of us want to pay taxes on that but don’t know how,” wrote one user.

“If they want us to pay our taxes they should tell us how so I can get an accountant!” said another.

The Taxpayer Advocate Service, which is an independent office within the IRS, pointed to those types of Internet comments and the advice they garnered from purported experts in a 2013 report to Congress. “Some of this speculation is incorrect, incomplete, or misleading,” the report said. “It is the government’s responsibility to inform taxpayers about the rules they are required to follow.”

The heart of the issue is whether the IRS will view bitcoins as a currency or a commodity.

But the government remains mum: “The IRS is aware of the potential tax-compliance risks posed by virtual currencies,” the agency said in an emailed statement. “The IRS continues to study virtual currencies and intends to provide some guidance on the tax consequences of virtual-currency transactions.”

They’d better study quickly. Bitcoin usage increased by more than 75 percent between July and December 2013 as the market value of bitcoins in circulation climbed to $12.6 billion from $1.1 billion. The climbing price has attracted investors and led businesses in the United States, including online discount retailer Overstock.com, to say they will accept the digital payment.

Bitcoin supporters don’t understand why the IRS is waiting to weigh in. “It shouldn’t be as magical as they’re making it,” said Daniel Morris, senior partner at Morris + D’Angelo, a Silicon Valley-based CPA firm. He said bitcoins should be treated like any other nondollar denominated transaction in tax filings.

via How Is Bitcoin Taxed? The IRS Doesn’t Know – NationalJournal.com.