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Topic: [2018-04-13] Americans Are Ducking Their Bitcoin Tax Bill, Research Shows (Read 172 times)

legendary
Activity: 1666
Merit: 1196
STOP SNITCHIN'
There are rare exceptions (such as like-kind exchanges) where this logic doesn't apply. But like-kind exchanges don't apply to cryptocurrency

If I am not mistaken, the like-for-like exception which allowed people to postpone capital gains was in place until last year. It is only now that it has been expressly disallowed. So a lot more people will be liable for capital gains tax due to alt trading.

That depends who you talk to. Most tax experts (including my attorney) agree that like-kind exchanges were never applicable to cryptocurrency. The new law made like-kind exchanges even more restrictive, but that doesn't mean they ever applied here in the first place.

Even if you ignore alt trading and focus on those who traded bitcoin USD, there are a lot of people who haven’t reported their gains. The IRS could decide to go after a few and make an example out of them.

I suspect that's what the Coinbase case was all about. We're probably going to hear about some audits and penalties emerging from that.
hero member
Activity: 672
Merit: 526
This is becoming a global problem. Many countries are only now beginning to investigate those who have had capital gains by investing in cryptocurrency. They are investigating, but they are not educating or reporting adequately on the process. They expect investors in cryptocurrency to be the same as in the financial market. But they are not.
legendary
Activity: 1918
Merit: 1012
★Nitrogensports.eu★
There are rare exceptions (such as like-kind exchanges) where this logic doesn't apply. But like-kind exchanges don't apply to cryptocurrency

If I am not mistaken, the like-for-like exception which allowed people to postpone capital gains was in place until last year. It is only now that it has been expressly disallowed. So a lot more people will be liable for capital gains tax due to alt trading.

Even if you ignore alt trading and focus on those who traded bitcoin USD, there are a lot of people who haven’t reported their gains. The IRS could decide to go after a few and make an example out of them.
legendary
Activity: 1666
Merit: 1196
STOP SNITCHIN'
I'm not surprised. Trying to collect taxes from coins that haven't been exchanged to fiat is not only greedy but also dumb. If I were a US citizen and had coins in my wallet that appreciated in value and paying taxes would mean that I have to sell some of my coins, I wouldn't do it.

The logic works like this. Each time you sell your BTC (for altcoins) or vice versa, you are realizing the gain/loss from your previous cost basis and reinvesting the capital into new investments. As far as tax basis, you're basically selling to fiat each time you trade because you are liquidating to realize the USD purchasing power and reinvest it.

There are rare exceptions (such as like-kind exchanges) where this logic doesn't apply. But like-kind exchanges don't apply to cryptocurrency.

If they want people to report it and pay they should allow them to use cryptocurrency. Selling  at low price, like the one we had last week, in order to pay taxes, is stupid.

Using a cryptocurrency to pay taxes means selling at the current price, since the liability is tied to USD. They ostensibly only care about USD, so why would they accept anything else?

Anyway, you should always trade or invest with a tax plan. If you never trade or sell (just hold), you don't have any tax liability yet. If you're a trader, then you could have sold to cover taxes in December or January, if not earlier. In fact, it's much more responsible to periodically withdraw USD to cover tax liabilities instead of waiting until Tax Day. Because let's say an exchange gets shut down or your account gets hacked and you lose lots of your profits. As far as the IRS is concerned, you're still on the hook.
legendary
Activity: 1904
Merit: 1074
I think there are quite a few reasons for this. One of which is the fact that a lot of "underage" kids are invested in Bitcoin and

their parents have not given consent for that. These kids are buying and trading on unregulated exchanges and the parents

are not even aware of this. When they come to know about this, they do not know how to handle that, because it will be

difficult to explain it to the IRS. How will the sex workers on Backpage explain their income?  Roll Eyes
full member
Activity: 448
Merit: 110
Many would be willing to take the risk of not paying tax on Bitcoin if it will end up putting them at a bigger loss. Also the whole policy of tax declaration on the average Bitcoin spent is not that clear.
legendary
Activity: 2170
Merit: 1427
It is also possible that some citizens simply do not know how to do this, because such a tax is collected for the first time.

It's not that tax is being collected for the first time. It might look like that with all the recent media attention concerning this subject, but it definitely isn't. The thing here is that resistance is futile when it comes to avoiding to pay tax, especially when you have bought your coins from an exchange. I wouldn't be surprised if the IRS is planning to do a Coinbase 2.0 attack on other exchanges to get what they are looking for. People feel too comfortable with how they believe the "anonymous" nature of crypto makes them untouchable, while in reality exchanges have all necessary data to make you pay for everything. Never underestimate the authorities when they are collecting 'their' due taxes. If you don't pay out of free will, they will rip you open and take it out of you.

That's why if you have coins that have never been on an exchange at all, or not in recent years, keep them offline and don't do anything with them. Better safe than sorry.
legendary
Activity: 2478
Merit: 1360
Don't let others control your BTC -> self custody
I'm not surprised. Trying to collect taxes from coins that haven't been exchanged to fiat is not only greedy but also dumb. If I were a US citizen and had coins in my wallet that appreciated in value and paying taxes would mean that I have to sell some of my coins, I wouldn't do it. If they want people to report it and pay they should allow them to use cryptocurrency. Selling  at low price, like the one we had last week, in order to pay taxes, is stupid.
member
Activity: 364
Merit: 10
It seems that Americans still shy away from paying taxes on income in the crypto currency. 25 billion dollars the amount is very large, and paid only a small part. Usually in the US there were no special problems with non-payment of taxes by citizens, because there it is considered a serious crime. It is also possible that some citizens simply do not know how to do this, because such a tax is collected for the first time.
full member
Activity: 364
Merit: 106
Now a lot of different exchanges. Coinbase misleading information about the accounts which had revenue of more than $ 20,000 for the year. What prevents to have multiple accounts on different exchanges. Turnover of each account should not exceed $ 20,000 per year. I think that if you want you can always find a workaround.
legendary
Activity: 1666
Merit: 1196
STOP SNITCHIN'
Credit Karma Tax analyzed the most recent one-quarter of a million filers on the company’s platform and discovered only “a tiny fraction” of the group had reported bitcoin gains. In fact, results were little changed from a similar study they did in February, with findings from the studies revealing fewer than 200 of a combined 500,000 filers reported bitcoin gains. Nonetheless, the most recent group’s results reflect “more than a 100% increase” versus the February findings.

But how do they determine who has reported "bitcoin gains?" Did they just search Form 8949s for the word "bitcoin" or do they include tickers like BTC and XBT, or other terms like "digital currency" and "cryptocurrency?" I've been advised before to avoid mentioning Bitcoin specifically on my returns. There is no specific guidance and the IRS really only cares about your tax liability, not property descriptions. It's possible that some people are reporting the income without specifying "Bitcoin" on the 8949.

I'm also not sure what the numbers should be. For comparison, 802 Coinbase customers filed a bitcoin-related Form 8949 in 2015, per the IRS. The IRS expects more than 155 million returns to be filed this year vs. Credit Karma's 500,000.

Jagjit Chawla, general manager of Credit Karma Tax, gave filers the benefit of the doubt, telling CNBC: “There’s a good chance that the perceived complexities of reporting cryptocurrency gains are pushing filers to wait until the very last minute.”

That's probably true, too. We have until the 17th to file. I haven't sent mine in yet..... Lips sealed
full member
Activity: 322
Merit: 217
While US tax selling is said to have fueled much of the pressure in the bitcoin price till the most recent turnaround, Uncle Sam may find he has come up short when tax day rolls around on April 17. That’s because only a fraction of filers are actually reporting their crypto-fueled profits from 2017, when the cryptocurrency market ballooned in value by $590 billion. According to research done by Credit Karma Tax and obtained by CCN, “reporting of bitcoin gains still at negligible levels as deadline approaches.”

Credit Karma Tax analyzed the most recent one-quarter of a million filers on the company’s platform and discovered only “a tiny fraction” of the group had reported bitcoin gains. In fact, results were little changed from a similar study they did in February, with findings from the studies revealing fewer than 200 of a combined 500,000 filers reported bitcoin gains. Nonetheless, the most recent group’s results reflect “more than a 100% increase” versus the February findings.

The data is alarming because Americans are expected to owe $25 billion in cryptocurrency-fueled capital gains for the 2017 tax year, according to Fundstrat’s Thomas Lee, who presciently called the end of the US tax season as the catalyst for the market turnaround. If Credit Karma’s findings are any indication, many people could find themselves in trouble with the IRS. Meanwhile, Fundstrat predicts that nearly one-third of cryptocurrency market participants are US-based.

Form 8949

The US government decided that for federal income taxes, bitcoin and altcoins should be taxed as property, requiring filers to report their profits or losses from last year’s run-up in the cryptocurrency market as a capital gain or loss. US residents who generated gains from their cryptocurrency holdings last year should file Form 8949, which is the document Credit Karma Tax is tracking to analyze results.

Jagjit Chawla, general manager of Credit Karma Tax, gave filers the benefit of the doubt, telling CNBC: “There’s a good chance that the perceived complexities of reporting cryptocurrency gains are pushing filers to wait until the very last minute.” Despite the risks crypto traders are willing to take in their investment portfolios, they may want to be a bit more circumspect in their dealings with the IRS.

Cryptocurrency investors are already on the radar of the IRS, as evidenced by US bitcoin exchange Coinbase’s recent disclosure that it turned over thousands of records to the tax agency, as CCN previously reported. In that case, the tax agency was probing the accounts of people who traded more than $20,000 in the 2013-2015 tax years.

https://www.ccn.com/americans-are-ducking-their-bitcoin-tax-bill-research-shows/
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