Deloitte's Massey: Bitcoin (BTC) Payments Are Taxable, IRS FAQ Spares Own-Wallet Moves

IRS Property Rules Reach Every Payment

Using Bitcoin (BTC) to pay for goods or services, or exchanging it for any other asset, can create a taxable gain or loss under United States federal tax law, Rob Massey, the global leader of Deloitte's blockchain and digital assets tax practice, said in an interview published on Monday, October 26. The mechanism is straightforward: the Internal Revenue Service treats virtual currency as property, so every sale, exchange or payment counts as a disposal, and the gain or loss is the difference between what the holder paid for the coins and their value when spent. That measurement tracks the Bitcoin price at the moment of payment, not the price when the coins were first bought. The IRS instructs taxpayers to record the date and time of each transaction, the quantity involved, the fair market value in dollars and the cost basis of the asset disposed of. Self-assessment does not stop at what a broker reports. Massey stressed that even where a broker's tax form omits some transaction data, the duty to report stays with the taxpayer. Form 1099-DA, the new broker reporting document, captures gross proceeds for transactions from January 1, 2025, while cost-basis reporting for certain transactions only applies from January 1, 2026. Gross proceeds alone cannot produce a final gain or loss, which is why basis confirmation matters. Coins held in self-custody sit outside the broker pipeline entirely, and the IRS does not claim the 1099-DA covers every wallet activity and transaction history. Taxpayers using brokers outside the United States may never receive the form at all, yet taxable transactions still must be reported. One relief measure covers brokers only: no penalty applies where a broker made a good-faith effort to file and furnish accurate 2025 forms on time, and that does not waive any taxpayer's filing obligation.

Massey Maps the Open Guidance Gaps

Not every movement of coins is a disposal. In an item added to its guidance on December 15, 2025, the IRS states that transfers between wallets, addresses or accounts owned by the same taxpayer are generally non-taxable. The carve-out has an edge: where cryptocurrency is used to pay a transfer fee, or is deducted from a balance to cover one, that portion can still generate a disposal gain or loss. Massey, who has advised on crypto tax matters at Deloitte since 2012, framed the wider problem in structural terms: broker forms will never capture the complete picture, because a 1099-DA does not reach activity across personal wallets, and on-chain records leave every payment visible to the tax authority. No de minimis exemption has become law, so no threshold shelters small payments from reporting; paying a plumber in Bitcoin (BTC) is taxable in the same way any larger transaction is. The questions reaching his desk have shifted as well. Business leaders now ask about ETFs, leverage and lending built on Bitcoin DeFi, and cross-border planning raises issues no existing tax treaty addresses, including withholding exposure and Subpart F rules that pull certain foreign subsidiary income into a United States parent's return. Multinationals, he noted, compare Bitcoin and stablecoins corridor by corridor when moving value. His requests are specific: additional guidance from Treasury and the IRS on allocating cost basis across self-custody wallets and broker accounts, on the treatment of lending, and on income classification. He distinguished the agency's wallet-by-wallet basis allocation guidance, which decides where an asset's cost sits, from any rule deciding whether the move itself is taxed. Advocacy, in his view, should target that guidance rather than a repeal of the underlying tax treatment.

A 2026 Basis-Reporting Test

The practical burden lands in the 2026 filing season. Because brokers reported gross proceeds without basis through all of 2025, taxpayers filing this quarter must reconstruct cost data the forms never carried, and Massey's account of self-custody record-keeping makes clear the IRS expects that reconstruction regardless. Coins investors HODL for years present the hardest case, and with 95% of supply already mined on the road to the 2028 halving, long-dormant coins are increasingly on the move; our coverage of dormancy easing to 26.59% tracks that shift. Payment acceptance adds a second front: with BTC Map counting 425 merchants accepting Bitcoin (BTC) across Los Angeles County alone, routine spending quietly widens the pool of taxable disposals.