Nobody likes doing taxes but April 17th is the official tax filing deadline in the United States. Going through vast records of a years’ trades and reporting profits is a time-consuming and complex operation and apparently most Americans, who make a living from crypto trading, are not doing it.
According to a recent report, fewer than 100 people have reported bitcoin holdings as the deadline day is approaching thick and fast. The figure comes from a popular financial app Credit Karma, which is used by many to file taxes and check credit scores. So far, more than 250,000 Americans have filed through Credit Karma and if we believe that only 100 of them own digital currencies that makes up for a measly 0.04%, which is curious since the recent surveys showed that 5% of all Americans possess bitcoin or other cryptocurrencies.
This leaves us with two feasible options: either after the fall of cryptocurrencies at the end of last year, people stopped investing in the volatile market and chose safer options or a lot of people are not telling the truth to the Internal Revenue Service (IRS). Obviously, the second option seems far more likely in this case.
Elizabeth Crouse, a partner at law firm K&L Gates told that, “If I had to guess, there’s probably a lot of underreporting. Most of the people in the cryptocurrency world tend to have a pretty high risk tolerance.“ The IRS considers cryptocurrencies to be property, therefore any transactions of crypto holdings need to be reported. Mining digital currencies is a taxable case as well, not depending whether the mined assets are sold or not.
The data is alarming and suggests that a significant amount of Americans might find themselves in trouble with the IRS. According to Fundstrat’s predictions, IRS is expected to collect around $25bln in crypto-related taxes for 2017 tax year as it also predicted that nearly one out of three participants of digital currency markets are based in the United States.
And while the clear guidance from IRS is still lacking in some areas, such as hard forks, which result in new cryptocurrency holdings, the regulators are trying to make things a little less confusing. Chainanalysis, a company that analyses blockchain transactions, has been hired by the IRS to look into possible taxation framework. According to the regulators, “This is necessary to identify and obtain evidence on individuals using bitcoin to either launder money or conceal income as part of tax fraud or other Federal crimes.“
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I have been following the crypto markets since mid 2017, just in time to witness the incredible surge of the digital asset industry. Fascinated by the potential of blockchain technology I’ve started to dig deeper and that’s how I ended up meeting the Toshi Times team. I hold a Political Science degree, therefore the crypto regulation development is particularly interesting for me. I’m also heavily involved with music, running my own label, a YouTube channel and working with distribution. People call blockchain the ‘Fourth Industrial Revolution’ and I believe it will change our daily lives in the coming years and we will have the front row seats to witness it.