As the world’s leading cryptocurrency, Bitcoin has provided incredible levels of profit for its investors, particularly long-term investors, some of whom have seen their initial deposit appreciate by over 9000% with recent spikes in interest. Even a recent investor would have seen the value of their coins double in just the last couple of months.
However, come tax season, there is apt to be some confusion among investors about how they go about declaring it. At present, over half the population don’t even know whether or not it is legal in the United States to own Bitcoins or other cryptocurrencies, let alone what tax implications it has.
All capital gains and losses ought to be reported to the Internal Revenue Service (IRS) by all taxpayers. Whether Bitcoin is recognised in the US as legal tender is irrelevant. However, we need only look back at recent history to see that the majority of taxpayers don’t seem to agree.
The IRS reports that 802 taxpayers included capital gains and losses in their 2015 tax returns. However, documents pertaining to a recent court victory against Coinbase (a well-known cryptocurrency exchange) included information about 14,355 customers, each of whom had traded a minimum of $20,000 in Bitcoin over the previous two years. With this information turned over the IRS following settlement, the Revenue made its position quite clear: these cryptocurrency tax evaders were in their sights.
And yet this threat had failed to filter down to the end user or, at least, they don’t seem to really care. In a recent poll of 564 Bitcoin traders, only 64% advised that they would report their capital gains and losses as part of their 2017 tax return, with 36% prepared to commit tax evasion this coming tax season.
As tempting a proposition as it might be, be warned. The IRS is determined to seek out cryptocurrency tax evaders, with new investigative and enforcement powers likely to be granted in the near future.
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