While you're tallying your bitcoin gains, don't forget the taxman

  • Bitcoin and its brethren are viewed as property, not currency, by the IRS.
  • The onus is on investors to report gains to the IRS.

If you're a bitcoin investor and have cashed in on your gains — or made purchases using the cryptocurrency — don't forget the Internal Revenue Service is entitled to a piece of the action.

The value of one bitcoin has surged this year to more than $16,000 as of Thursday morning from $997 (and up from less than a dollar in 2010). There's a good chance if you have cashed out or paid for anything using it, you have capital gains to report to the IRS.

Basically, the tax agency views bitcoin and other cryptocurrencies as property and not currency for tax purposes. And although you may not receive a Form 1099 from whatever exchange you trade on, you remain responsible for paying taxes on gains. (Click on chart below to enlarge.)

"If you make a transaction, the onus will be on you to report it," said certified financial planner Samuel Boyd, senior vice president of Capital Asset Management Group in Washington, D.C. "Those transactions generate either short-term capital gains or losses or long-term capital gains or losses."

For many investments, individuals generally receive a Form 1099 that shows their taxable gains. The form also is sent to the IRS, which gives the agency a way to identify any differences in what's reported between brokerages and taxpayers.

Even if you get no official notice of your taxable gains, the IRS wants its share. A U.S. District Court judge in California recently ordered Coinbase, a popular platform for buying and selling bitcoin and other cryptocurrencies, to turn over identifying information on accounts worth at least $20,000 during 2013 to 2015. It's unclear whether the exchange will comply or contest the ruling.

Jaap Arriens | NurPhoto | Getty Images

The order, which affects about 14,000 accounts, is a narrowing of an earlier effort by the IRS. In a blog on the Coinbase website, the company notes that the first request would have impacted another 480,000 accounts.

The court case arose after the IRS found that for in each year from 2013 to 2015, only about 800 taxpayers claimed bitcoin gains. During that time, the cryptocurrency rose to $430 from about $13.

So how do you determine what you owe?

If you held it for one year or less, it is a considered a short-term gain and is taxed as ordinary income. Depending on your tax bracket for 2017, that could range from a tax rate of 10 percent to 39.6 percent.

"It might seem innocuous and veiled and like no one will follow up, but records of those transactions are available." -Samuel Boyd, Capital Asset Management Group

Any bitcoin you sold or spent after owning it for more than one year is taxed as a long-term gain. Taxable rates on those gains range from 0 percent to 20 percent, with higher-income households paying the highest rate.

In a nutshell, although bitcoin and its brethren are often viewed as being anonymous, not reporting your gains could be viewed as tax evasion by Uncle Sam.

"I've told clients who own it that it's up to them to track their cost basis, their holding period and their sale price," Boyd said. "It might seem innocuous and veiled and like no one will follow up, but records of those transactions are available."

More from CNBC Personal Finance:

Hey bitcoin millionaire: Give away your fortune for a tax break

Advisors: Here's what you need to know about investing in bitcoin

Donors boosting charitable giving ahead of tax reform

How retirees can avoid mounting cybersecurity threats