Tuesday, April 17, 2018

Showdown may be looming as less than one tenth of one percent appear to be filing taxes on Bitcoin profits

It's officially Tax Day this April 17, and an interesting dichotomy appears to be occurring that could potentially lead to a showdown between the IRS and cryptocurrency traders.

According to survey out from Credit Karma, less than one tenth of one percent of individuals claiming profit from the sale of Bitcoin are reporting the windfalls on their taxes.

With the US tax deadline just one day away, crypto investors who traded actively during the market's run-up and inevitable meltdown should have a lot of activity to report to the IRS. 
But according to a survey conducted by Credit Karma, only a handful of people who have filed their taxes using Credit Karma's tools have reported bitcoin holdings or holdings of some other cryptocurrency - fewer than 100 out of a total of 250,000 filers, or a whopping 0.04% in total. 
In all likelihood, this means that (tens of) thousands of bitcoin traders are refusing to pay the IRS, either betting on the anonymity of the blockchain to conceal their identities, or perhaps in some cases they simply don't have the money to pay, having lost most of their profits during the market's spectacular meltdown, as was the case for one anonymous trader who complained on Reddit that he owed the IRS $50,000 that he didn't have, according to CNBC
"If I had to guess, there's probably a lot of underreporting," said Elizabeth Crouse, a Seattle-based partner at law firm K&L Gates. "Most of the people in the cryptocurrency world tend to have a pretty high risk tolerance." - Zerohedge
There are two schools of thought when it comes to the question of needing to pay taxes on the buying and selling of cryptocurrencies.  The first of course is the reality that even the sector itself calls their tokens a currency, which means capital gains taxes are appropriate for any winning Forex transaction. On the other hand is the argument by anarcho-capitalists that as a decentralized and unregulated asset class, it should be exempted from taxation since owners trade it more along the lines of barter than they do an investment.

Either way, a showdown may be on the horizon between the IRS and crypto holders, and we know who usually wins those battles.


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