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.