Bitcoin may have peaked in terms of value and public interest in 2017, but the cryptocurrency has been far less popular this tax season. According to a recent report, fewer than 100 people have reported bitcoin holdings so far.
The figure, reported by CNBC, comes from Credit Karma, a popular financial app through which people can view their credit score and file taxes. Of the more than 250,000 people who have filed through Credit Karma this year, a whopping 0.0004 percent have claimed to have money in bitcoin or other cryptocurrencies.
This means one of two things: either the incredible rise and completely inevitably fall of the cryptocurrency market was all just a fever dream and no one actually put a single cent into the inherently risky concept because they all knew safe, reliable investment options were available... or a bunch of people are lying to the IRS.
It is almost certainly the latter that is true. “If I had to guess, there’s probably a lot of underreporting,” Elizabeth Crouse, a partner at law firm K&L Gates, told CNBC. “Most of the people in the cryptocurrency world tend to have a pretty high risk tolerance.”
Cryptocurrency holders aren’t exactly new to fudging the numbers on their taxes. According to the IRS, just 802 people in total reported cryptocurrency gains and losses on their tax filings in 2015. While the digital currencies were nowhere near as popular back then, assuredly more than a couple hundred people had holdings.
In part, it’s the complexities of reporting cryptocurrency transactions that have caused investors to opt out of the process entirely. The IRS has offered guidance on bitcoin transactions since 2014 and considers the cryptocurrency to be property, not currency. As such, every purchase, sale, trade, and mining effort is considered to be a taxable event.
For those who spent the whole year trading on the cryptocurrency markets, that creates a lot of activity to report—especially for those who didn’t make much or ended up losing it all during the market’s downturn.
Bitcoin traders have been less than pleased with the realization they have to pay taxes on any of their earnings. Some have learned that they racked up a tax bill considerably larger than their annual income. On Reddit, users have reported owing tens of thousands of dollars to the IRS for their transactions.
Others have opted simply not to pay and dared the IRS to come find them, betting on the anonymity of the blockchain. This is, of course, a terrible idea, as bitcoin is not anonymous and the IRS has the tools to track people down.
Taxes are due April 17th this year. Here’s hoping you don’t have any bitcoin to report.
[Investopia, CNBC]