This is in fact not a new law, nor unique to Bitcoin. According to existing law, when anything other than Federal Reserve Note funny money is used to make a payment of any sort, there is a taxable gain that needs to be calculated and declared for the transaction.
The government has a reverse midas touch. Everything they touch turns to trash. Yet another example of this phenomenon (if any were needed) reared its head in the Bitcoin market this past week when the IRS declared that Bitcoin is property, not currency, and thus subject to capital gains tax. And with that one move, the government has created either a mind-boggling burden of paperwork and hassle for Bitcoin users or an entire new class of tax cheat, depending on how people respond.
What the ruling means is that when you pay with Bitcoin you will have to declare the difference between the price you originally acquired the Bitcoin at and the price at which you sold it as a capital gain, fill out a 1099, and pay the capital gains tax. If you've been holding onto the Bitcoin for over a year, it will fall under long-term capital gains rules, but if you've held it under a year it will be taxed as a short-term capital gain, which is equivalent to the income tax rate.
The fallout from this decision is still being taken in by the Bitcoin community, but CoinDesk and other cryptocurrency news websites have confirmed the ruling with tax lawyers, accountants and even the IRS itself. There is simply no getting around it: if you are an American citizen buying a coffee or a sandwich at that trendy new Bitcoin cafe, you better be prepared to calculate how much you owe to Uncle Sam. Although on the plus side, you only have to fill out the 1099 if you're conducting a transaction as part of your business, not for personal expenses.
This is in fact not a new law, nor unique to Bitcoin. According to existing law, when anything other than Federal Reserve Note funny money is used to make a payment of any sort, there is a taxable gain that needs to be calculated and declared for the transaction. Consider this new IRS guideline a friends reminder from the criminal Federal Reserve bankster mafia that controls the money supply that they do not take kindly to competition, whether virtual or otherwise.
The real question about this ruling, of course, is this even feasible to implement and can it ever be enforced? The first question is important because the Bitcoin market fluctuates by the second and it would be extremely cumbersome to have to calculate the buy/sell spread of each Bitcoin used in the transaction, potentially acquired at different times for different amounts. The second question is important because pseudonymity is woven into the very fabric of this virtual currency...uh, property. So the idea of IRS agents diligently working their way through millions of virtual transactions looking for clues that might tie you as an individual to one of them is ridiculous in and of itself. The only place where enforcement pressure could realistically come would be at the point of sale, but if transactions are online on websites hosted on foreign servers, then there are a sufficient number of layers between the user and the transaction to make enforcement impracticable even for a government with NSA data on every citizen.
That being said, it is nonetheless true that those who use Bitcoin from this point without calculating capital gains will be in violation of the law. For those who couldn't tell a Bitcoin from a Dogecoin and don't care about virtual currencies in the least, this is (at the very least) a good example of the ways the government can make things complicated for people who are trying to get around the markets. The moment gold price manipulation fails and prices start to rise, look for similar burdensome rules to be applied to precious metals transactions.