If you dont know anything about the Bitcoin market, know this: you can use the digital currency as a form of payment on sites like Overstock.com, Amazon, and even Victorias Secret.

Bitcoin demand is very real. In fact, the digital currency is so popular that the Internal Revenue Service decided to get involved.

In March, the IRS made its first major ruling on digital currencies, including Bitcoin. The agency ruled that digital currencies are not actual currency but rather a form of property and, as such, are susceptible to capital gains tax. Naturally, this decision was met with feelings of anger and curiosity. But for the average Bitcoin enthusiast one important and very practical question surfaced: How on earth am I going to pay my taxes?

I had a chance to speak with Jake Benson the founder and CEO of LibraTax an online accounting software company that helps individuals prepare their Bitcoin taxes.

Who is using Bitcoin?

Benson:More and more people believe in digital currencies as a technology and Bitcoins as a representation of that technology.Very large and reputable companies such as PayPal are now enabling Bitcoin as a payment rail for digital goods.Granted, some users are still crypto-anarchists, libertarians, and criminals, but overall, the digital currency market is evolving quickly and becoming much more mainstream.

Last year the IRS ruled that Bitcoins are considered property and not currency. How will this impact the Bitcoin market and taxpayers in general?

Benson:The immediate knee-jerk reaction was a disaster. How on earth are people going to keep track of all their trading activity? Bitcoins are now considered a form of property so you need to apply capital gains tax to every single transaction you make, no matter the size. Whether you are using Bitcoins to buy a cup of coffee or buy a house, you still need to log that transaction. Its seemingly impossible to keep these records manually, and there can be a lot of math involved in calculating the right tax.

LibraTax automates this process and makes accounting easy for the Bitcoin user.

What is LibraTax all about?

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Bitcoin and Taxes, Now Unavoidable