Warning!!! The new US tax bill can and will screw up many crypto traders lives
This might be old news for you because me and others have been talking about it. If so maybe you should blog about it as will. All steemains must know about it because many of them do trade in crypto currencies. Or you can just resteem this post.
It is yet to be seen how the new tax bill will hit the crypto exchanges. As of the new year all crypto exchanges are to be considered taxable events. It might reduce the speculations and the volatility out there thus bringing and attracting more investors. Or it could crash the whole crypto as we know it.
What does all of this mean?
Simply if you trade 1 Bitcoin to buy 2 Dashs and sold the Dashs again for 1.5 Bitcoins, then you owe the IRS X% of the .5 Bitcoin you made as profit. To convert this to dollars let us assume for the ease of calculations that at the time of “buy and sell” the average Bitcoin price was $20K and the average Dash price was $1000. Then you owe the IRS x% percent of the $10 k you maid. The x depends on how long you held the 2 Dashs and your total income tax bracket. Let us say 25%.
You might say, I made profit and I will pay the taxes so what. This is the big entrap if you are not watchful. You do owe IRS $2500 at the end of the year even if Bitcoin and Dash values go to Zero. Yes you got right ZERO. At the end of the year crypto might collapse and Bitcoin go to $1000. And you have to come up with $2500 then you have to sell the 1.5 Bitcoin that you have and feed uncle Sam and still owe $1000. What if Bitcoin goes to $100? Then you have to sell the 1.5 Bitcoin for $150 and you still owe IRS $2350. Now what if you did this with 100 Bitcoins and the same scenario happened? May be your house is not enough to pay the bill.
You might say Oh that is not going to happen to me!? here is a quote from an article that talks about what happened to Tech workers' stock options
“Many of these workers now owe far more in taxes than their stock is worth. Former Cisco engineer Jeffrey Chou, 32, owes $2.5 million in taxes on company stock he purchased last year that has since withered in value. Chou figures that if he were to sell everything he owns, including the three-bedroom Foster City, Calif., townhouse that he shares with his wife and 8-month-old daughter, the family still could not pay the bill.”
And here one more:
” Many of the affected workers, however, said they believed they were doing the right thing by exercising options and then hanging on to the stock instead of selling it for quick profit. Some did not understand the tax implications of their stock purchases, and many said they wanted to show loyalty to their companies.”
"There was this feeling of 'hold on to it for the long term,' " said Marilynn Goldberg, an unemployed Redwood City, Calif., executive recruiter who faces a $500,000 tax bill from Portal Software Inc. stock she purchased using options last year. Shares of the Cupertino, Calif.-based company have fallen more than 80% since then.”
I am not by any means an expert on anything. This is my own conclusion. Do your own research please.
Sorry for the bad news. I just don’t want you to be the next victim.
I feel a shame to ask for an up vote. But, hey, we are grownups we can take it.
If you like to see the source of the article please ask in the comment section below I will be more than happy to post for you.
