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If you're an individual who must make estimated tax payments and did not pay you last installment of estimated tax by January 15, you may chose to file your income tax return (1040) and pay by February 2 to avoid those nasty penalties!

Before getting too excited about virtual currency, check out this excerpt from the IRS on Virtual Currency Guidance....

IR-2014-36, March. 25, 2014 -

WASHINGTON — The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.

In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.

The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:

•Wages paid to employees using virtual currency 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. Normally, payers must issue Form 1099.
•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.
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Home office deduction? Read on...

Beginning tax year 2013, there is a new, simpler option to figure the business use of your home. The simple method multiplies the square footage of your home office by a prescribed rate ($5/sqft).

Although this simple method may be advantageous for some, many taxpayers may opt to continue using the actual expense method as the simplified method maximum deduction per year is $1,500.

Regardless of which method you use, know that the rules for who may claim a home office deduction remain the same.

Should you have any questions regarding home office rules or any other tax matters, feel free to contact one of our tax professionals at 317-856-4593.