By
Chimamanda U. Martha
December 12th, 2023
Although the number of people reporting their crypto investments is low fat the moment, it is expected to grow as the final date of filing comes closer.
Internal Revenue Service (IRS), the revenue service and taxation body of the United States federal government, has finally started to receive submissions from crypto investors who are now reporting their crypto investments. Based on a transaction to the U.S tax authorities, a company named as Credit Karma has recently reported that less than 100 out of 250,000 individuals have already filed federal taxes this year.
However, according to a Credit Karma study, a credit score startup and research firm Qualtrics studied data of 2000 Americans of which nearly 57% people admitted that have realized some gains from their cryptocurrency investments. Almost the same percentage of people said that they have never reported their cryptocurrency gains to Internal Revenue Service while nearly 50% of the 2000 Americans said that they are aware of the fact that investing in cryptocurrencies affect their taxes.
The IRS has made it clear that it considers virtual digital currencies like Bitcoins as a property for the purpose of federal tax and hence any profit or loss registered from the trading of these virtual coins should be reported as capital gains and losses.
Last year in 2017, following the craze surrounding Bitcoin and other digital coins, there was a huge rush of investors at the crypto exchanges. Coinbase, one of the biggest crypto exchange recently reported a billion-dollar revenue for the last year which was 66% above the company’s actual estimates. Coinbase said that by the end 2017, it has over 13 million registered users on its platform.
However, it is very difficult to trace out that out of these 13 million, exactly how many people are Americans as many of the crypto accounts trading on the exchange have been built by pseudo or anonymous names. This scenario was quite common on exchanges across the globe till last year. Earlier this year, to get hold of people evading taxes through cryptocurrency investments, the South Korean government introduced a regulatory policy which banned people trading into cryptos from anonymous accounts.
The general manager of Credit Karma Tax, Jagjit Chawla said that it is not much of a surprise that only a few people have reported their crypto gains till now. Most of the Americans who find themselves in more complex tax situations, usually file their report closer to the deadline. Chawla said: “However, given the popularity of bitcoin and cryptocurrencies in 2017, we’d expect more people to be reporting.” The deadline for filing taxes in the U.S this year is April 17, 2018.
Moreover, one of the things which have also kept many people from filing their crypto gains is that earlier, there were no clear guidelines issued by the IRS as to how it perceives the digital asset holdings. Also, many people were not aware of the fact whether crypto holdings and profits will be treated differently or not for the short-term holding of less than a year and long-term holding for above one year’s time.
Clearing this air, Jerry Brito, executive director of Coin Center, said: “It’s no different than any other asset. If you bought a currency and hold it more than a year, your tax rate is probably going to be less than you’d otherwise pay.”