Bitcoin Investors Aren't Paying Their Cryptocurrency Taxes

taxes

#1


via Fortune

Despite months of warnings to pay their taxes on cryptocurrency profits, American Bitcoin investors aren’t in a hurry to tell Uncle Sam what they owe.

Early data from one popular tax preparation service shows that only a minuscule proportion—just .04%—of U.S. tax filers have reported their cryptocurrency gains and losses to the Internal Revenue Service so far this year. That’s far fewer than the 7% of Americans who are estimated to own Bitcoin or another cryptocurrency, and who are likely to owe taxes to the IRS on those investments.

Of the first 250,000 people to file their tax returns using Credit Karma, fewer than 100 of them disclosed any taxable event for cryptocurrency. Of those, only a single person disclosed a crypto gain or loss big enough to be “significant,” according to Credit Karma, a free credit-monitoring startup.

While it’s still early in tax season—at last count, the IRS had received only 18.3 million individual tax returns so far this year, or some 13% of the total expected this tax season—cryptocurrency investors still seem disproportionately reluctant to report their earnings. (Read our guide on how to pay Bitcoin taxes here.)

For example, in a survey of more than 2,000 American cryptocurrency owners conducted in January by Credit Karma Tax along with research firm Qualtrics, some 57% of respondents said they’d realized gains on their crypto investments—profits the IRS considers taxable. And yet even more Americans (59%) said they had never reported any such gains to the IRS.

Although users of Credit Karma’s tax prep service aren’t representative of all U.S. taxpayers, they do account for a significant part. One million people filed their tax returns through Credit Karma Tax last year, the first time the company offered the online product. That makes the service the nation’s fifth largest tax preparer, though Credit Karma expects to become the third largest this year, just behind TurboTax and H&R Block.

When it comes to paying taxes, Bitcoin investors have a history of being evasive. The IRS last year successfully sued Coinbase, a leading cryptocurrency exchange, for access to customer records after only 802 people reported gains or losses from Bitcoin in 2015. (A court last fall ordered Coinbase to identify more than 14,000 customer accounts to the IRS.)

Meanwhile, high-profile Bitcoin investors have been warning their crypto compatriots to comply with IRS rules. “When I talk to the blockchain community, I’m always pushing them—I’m like, ‘Dudes, A), pay your taxes.’ Because nobody in that space pays taxes,” Mike Novogratz, a billionaire hedge fund manager who now primarily invests in cryptocurrencies, said at a conference in June. “Listen, the IRS is going to come after people. People are making real money now. So the IRS isn’t stupid.”


#2

I doubt this article has any meaning.

For the big traders: The Coinbase 1099-K’s came out only 13 days ago and they may be dealing with the hysteria of having to somewhat reconcile your spreadsheets/ reports to the government form and then educating their accountants on crypto.

For the little guys who use the H&R Block and turbo Tax-like services: It may be “Oh gosh, I have to pay taxes! I’ll hold off filing/ preparing and paying until April”


#3

I laughed when I read ONE person! That is funny!


#4

For me, being a little trader, I don’t see the point of filing. I only gained like $30 dollars from a handful of trades, and I’ve yet to cash any of my investments.

I mean I understand Uncle Sam wants his money, but paperwork for $30…

But let’s say I didn’t report this “gain” what could be the ramifications of not filing this “gain”?


#5

Isn’t there something about you have to realize 10,000 in gains before you are taxed? I thought I saw that somewhere but I am no tax guy or crypto expert so don’t take my word for it! DYOR.


#6

But let’s say I didn’t report this “gain” what could be the ramifications of not filing this “gain”?

If the IRS found out about it the consequences would not be financially substantial but they would amount to unnecessary non-monetary irritation. They’d probably send you a notice asking you to pay some penalty(s) and interest and they would dun you if you did not pay. Then they might send your notice to a collection agency (See link) and you’d get those people on your back.

It’s not advised for you to ignore the obligation. Just get it done.

https://www.irs.gov/newsroom/new-private-debt-collection-program-to-begin-next-spring-irs-to-contract-with-four-agencies-taxpayer-rights-protected


#7

I don’t think that there are much people in the cryptocurrency business that are honestly paying taxes or disclosing themselves as beneficiaries from cryptocurrency mining and trading. The system itself gives the chance of staying anonymous and the users are actively benefitting from it. Why would they give away some money if they know that they can easily avoid that and remain anonymous?


#8

Let’s not forget that there’s no taxable events until you sell at a profit. Although they may expect 7% to be reporting profits many never sold or traded. They just held like me. This year I don’t really have anything to report because I’m not selling and don’t even really trade.

A year or two down the road when I decide to pay off my house or something is when they will see a massive tax liability on my part.

Let’s also not forget that many people are underwater so they have no tax liability regarding crypto. There’s been a huge amount of new people in this space and most coins are underwater compared to their prices a few months ago.


#9

Will do. Thanks again, Peter.


#10

Luckily I don’t need to worry about this as I am gambling over here in the uk :uk::wink: there must be a way of getting round this though.
good luck guys I feel for you.:v:


#11

I agree with you on the mining issue – there is A LOT of wiggle room on that. There are no controls on the systems or ways of monitoring the output. You could drive the proverbial truck down this lane.

As to the trading there are loopholes that I do not see getting plugged – P2P and offshore funds trading being big holes. Others guys??

Swiss cheese folks. Swiss cheese.


#12

I think it’s wise to report…
I reported my sales of ETH.
I’m holding long term some altcoins so I haven’t reported those since they are still unrealized but any short term trading, I think it would be wise to be honest with the government.


#13

I’ve already filed, reported, and paid. It wasn’t that much, but the peace of mind in not worrying about it til next year is great.


#14

I actually spoke to my PCA about reporting and he recommended say nothing until I get something in the mail from coinbase. If I don’t then don’t worry about it till next year. Is this good advice? I’m not so sure… I mean I have not made much and the cost would be minimal. What I took away from the conversation was that not to many people really understand whats going on right now. Even the CPA’s and the IRS are not really sure how they are going to be taxing the Crypto’s because if they tax the gains they have to allow everyone to deduct the loses and the IRS does not want that. Not this year…For sure… Please someone correct me if I misunderstood my accountant.