Tax filing deadline in the U.S. comes just in a couple of days. But as it has been announced by Credit Karma, a very small group of American residents have filed their tax reports on cryptocurrency holdings.
Credit Karma Tax has studied the most recent 250,000 filers on its platform and has found out that only “a tiny fraction” of that group had reported their crypto-fueled gains. This tiny fraction is fewer than 100 people which is roughly 0.04 per cent.
The results of this research are really alarming as it is believed that for the 2017 tax year American residents have $25 billion in cryptocurrency-fueled capital. But if Credit Karma’s estimations are close to the reality, a lot of American people may have problems with the tax authorities.
The Internal Revenue Service (IRS) of the United States federal government considers bitcoin and altcoins to be a property and their holders should report their profits or losses. Transactions with cryptocurrencies are subject to capital gains tax. And it is so regardless of the type of this transaction, it could be, for example, just purchasing goods on the internet using crypto assets or trading on crypto exchanges.
In other words, those people who sold cryptocurrency holdings in 2017 now are obliged to report those transactions. But when investors are keeping crypto assets that were bought last years, no taxes are applied.
Crypto mining is also taxed. And there is no difference whether the gained holdings are sold or not. New cryptocurrency holdings that were generated as a result of hard forks, as for example the bitcoin cash fork, are also taxable in some situations, but the IRS still hasn’t presented clear guidance for this aspect.
US residents who have received profits from their cryptocurrency holdings last tax year should file Form 8949. This document is tracked by Credit Karma Tax for analyzing results. Nevertheless, as we have already mentioned, only a very small group of people have already fulfilled their tax obligations in respect of their cryptocurrency holdings.
According to general manager of Credit Karma Tax Jagjit Chawla, “There’s a good chance that the perceived complexities of reporting cryptocurrency gains are pushing filers to wait until the very last minute”.
Though crypto traders are not afraid of taking risks in respect of their investment portfolios, they seem to be much more cautious about dealing with the IRS. “I want to reassure people that it’s not as complex as it may seem at first glance and that Credit Karma Tax has a number of resources about how to approach bitcoin and taxes,” added Jagjit Chawla.
Cryptocurrency investors are already under close attention of the IRS, as it has become clear from the recent information about the fact that Coinbase was enforced to send thousands of records to the tax agency. The IRS was mostly interested in details about the accounts of people who had more than $20,000 in transactions of any type in the 2013-2015 tax years.