The global trend for buying cryptocurrencies seems to grow daily, however crypto investors in the U.S. are still keen to hide their gains from the taxman. The Internal Revenue Service (IRS) is trying its best to track taxes owed and cross-check records, but it is not receiving much support from American crypto holders.
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As reported in Fortune, more than 7 percent of Americans are known to be actively involved in the bitcoin or cryptocurrency market. However, less than 0.4 percent of all U.S. tax filers have declared cryptocurrency-related profit and loss records to the Internal Revenue Service.
Bitcoin and IRS Play Cat and Mouse on Taxes
The crypto market has seen tremendous growth over the past 12 months, however, crypto investors disguising gains on investments in the digital currency market, disappointing the IRS. The federal tax agency has issued multiple warnings urging crypto investors to pay their dues on crypto profits. However the 0.4 percent statistic indicates most of them owe a lot more.
According to Credit Karma, a personal finance company, out of 250,000 filers, only 100 have reported taxable events for virtual currencies. The IRS itself has so far received only 18.3 million individual tax returns this year, but the number reporting crypto-related capital gains still appears lower than it should.
Credit Karma’s survey, which it conducted with research company Qualtrics, said about 57 percent of the American digital currency investors had realized profits on crypto investments — but over 60 percent also asserted they had never reported those gains to the IRS.
IRS May Win in the End
The IRS, apart from issuing warnings, is known to have taken appropriate actions against wrongdoers. In fact, in 2015 the agency took legal action against Coinbase, the country’s leading cryptocurrency exchange, after only about 800 people declared cryptocurrency gains and losses. All Bitcoin investors have been warned to comply with tax laws.
The agency will definitely take action to make sure people pay what they owe. Over the course of bitcoin’s boom, the IRS has noticed that tax returns aren’t lining up with the cryptocurrency mania.
Mike Novogratz, a vocal crypto investor and billionaire hedge fund manager, also advised fellow crypto traders to report cryptocurrency gains to the IRS.
“When I talk to the blockchain community, I’m always pushing them—I’m like, ‘Dudes, A), pay your taxes.’ Because nobody in that space pays taxes,” said Novogratz in a conference. He added “Listen, the IRS is going to come after people. People are making real money now. So the IRS isn’t stupid.”
The current relationship between bitcoin investors and IRS isn’t very smooth. It seems bitcoin investors are trying to stay off the revenue department’s radar for as long as possible. Many other countries’ tax and revenue officials are also looking for ways to bring crypto traders under the same revenue law.
Are bitcoin and cryptocurrencies really the tax havens some investors think they are? Let’s hear your thoughts.
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