Money Under Mattresses to Coins Encrypted in Wallets
Credit Karma revealed data on Friday showing only 250,000 Americans filed taxes on cryptocurrency and fewer than 100 mentioned gains on their investment(s). This may sound strange considering there are only 3 days left until tax season’s closing. But cryptocurrency is the new kid from the blockchain that is barely entering serious regulatory scrutiny.
Low on Crypto: Something’s off Here
If you look at the numbers, it becomes obvious that things just aren’t adding up. The market of Bitcoin exceeded $500 billion in paper value last year. This means that taxpayers would owe about $25 billion in capital gains taxes. General manager of Credit Karma Tax, Jagjit Chawla, claimed that filers are most likely waiting “until the very last minute” due to perceived complexities of reporting cryptocurrency. Not everyone gave filers benefit of the doubt. Partner at law office K&L Gates, Elizabeth Crouse, believes that:
If I had to guess, there’s probably a lot of underreporting.
There is a general belief that bitcoin investors are more privy to risk and these stats of evading taxes support the idea. But even if a large portion of crypto holders don’t report capital gains or taxes on bitcoin, what are the consequences of doing so?
The IRS views cryptocurrency as property so identical economic values would be adhered to. Your taxes are largely dictated by the gains or losses your property inherits during the year. Any form of exchange for products or services involving Bitcoin and others makes it taxable using form 8949. However, it’s unclear on whether or not exchanging cryptos, i.e. bitcoin for ethereum, falls under this category. If a taxpayer purchased bitcoin and has strictly held it without any forms of exchange, it voids tax liabilities. In theory, the IRS can come after you for failure to report cryptocurrencies so it’s useful to understand the process.
What Goes Around…Bad Karma
Bitcoin investors may be in the clear for now but it won’t last forever. Regulating agencies from every end of the map are taking a closer look at cryptocurrencies. More and more leading corporations have discussed offering their own alternative digital currencies. And despite the continual scoffing seen from a number of financial institutes on the feasibility of bitcoin, many are starting to admit the future will not be without blockchain and a selected number of currencies. Bitcoin is at its in-between phase of abuse and responsibility. With the growing adoption of bitcoin and affiliated technologies, it is likely to continue upwards into responsibly operating within the ethical structure of established regulations.