Henchman, an attorney who has testified before Congress six times, said that as with the case of other property investments, bitcoin users are retroactively responsible to keep track of the dollar price of the currency when it was purchased, the dollar price when it was spent, and to pay taxes on the difference.
"It makes it undesirable to conduct transactions using bitcoin," he said. "When you buy or sell something with Paypal, credit or cash, you're not keeping track of what the monetary value is relative to a base currency," but now that's exactly what you'll have to do with encrypted currency, he said.
Henchman said he hoped the IRS has "better things to be doing" than strictly enforcing the law, which would be difficult in the first place, since many bitcoin accounts, or "wallets," aren't tied to any particular name, much less a social security number.
Well, that's exactly why they'll move to change it or shut it down. It's why I've always said that BitCoin was a stupid idea.