This is the first of my new monthly blogs on general accounting issues of interest. I am a CPA with a career focused on corporate tax, with a wide range of experience from being a Vice President of Tax Preparation Services to a Depreciation/Tax Specialist to being a Portal Content Manager.

This monthly blog will cover issues of current interest to the business community: current events (including recent tax court rulings), expiring tax provisions, and what changes (in both the tax and GAAP arenas) you might expect will affect accounting for business transactions on tax returns and financial statements.

So, let’s catch up on what has been happening lately in the realm of accounting.

As to recent rulings and published guidance:

• There is a new IRS Notice 2014-21, which provides guidance for the handling of transactions that use virtual currency such as bitcoins. The IRS states that for tax purposes, virtual currency is not to be treated as currency but rather as property. This means if the virtual currency is held as an investment, gains and losses will be realized as capital in nature. If held as inventory for sale, ordinary income will result. When bitcoins are “mined,” their fair market value should be reported as gross income on the date of receipt. And, finally, if an employer pays its employees with virtual currency, it is subject to federal withholding and payroll taxes.

• The IRS Office of Chief Counsel issued a field attorney advice memorandum (FAA 20141002F), which denies a business from claiming Section 172(f) losses for legal fees incurred to contest workers’ compensation claims. The denial was due to two reasons: the company didn’t prove that the state’s workers’ compensation laws required the payment of the legal fees nor did it prove that the acts that caused the legal fees had occurred at least three years before the start of the taxable year.

While not all bills introduced in Congress become law, they are often of interest as they provide insight into current Congressional thinking. The following briefly describes some of the current bills before Congress, as well as other recent activity affecting accounting rules:

• David Camp (R-Mich.), Chairman of the House Ways and Means Committee, has approached Treasury Secretary Jacob Lew about a possible consolidation and simplification of the various education tax incentives. This was done separately from the recent push for a comprehensive revision to be made to the tax code. Breaking off such a piece of the tax code for modification could, therefore, produce a precedent for future tax reform and a shift to a different approach being taken in Congress.

• A bill (S. 2139) has been introduced to create tax incentives for high-tech startup companies that are organized as passthrough entities. Current incentives are aimed at assisting small businesses once they become profitable. As the writers of this bill explained, however, many new companies do not start to earn income for a much longer period of time than was the case in the past. Since many of the high-tech companies need to invest heavily in research and development, the current passive activity loss rules often prevent the losses from flowing through to the investors until income is achieved.

• Legislation to renew the law that currently prevents states from taxing access to the Internet may be difficult to get passed. Certain Senators are intent on attaching to it additional legislation that would help states collect sales taxes on online purchases. Whereas the former, the expiring provision affecting access to the Internet, is almost unanimously supported by Congress, the sales tax provision is definitely not.

• FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board) have been working diligently together for several years now to produce a revenue recognition standard, overhauling how companies calculate the top line of their income statements. I will cover this topic in more depth in my future blogs!