The Internal Revenue Service (IRS) has provided guidance on reporting income taxes on Bitcoin trading (and other cryptocurrencies) since 2014. But whether or not to report such cryptocurrency earnings didn’t become a serious question until this year, as the sudden Bitcoin boom in 2017 attracted a flood of investors.
According to a January survey of 2,000 Americans by market research firm Qualtrics, 57 percent said they had made a profit from trading cryptocurrencies in 2017. (A separate study estimated that seven percent of the total U.S. population owned cryptocurrencies at some point in 2017.)
However, only a fraction of them plan to record their crypto earnings on this year’s tax forms.
Nearly half (46 percent) of people who realized a gain on cryptocurrencies said they wouldn’t tell the IRS about their winnings, said a poll of 2,600 people from April 5 through April 12 conducted by tech industry forum Blind. Fifty-four precent said they would report earnings from cryptocurrencies.
But the percent who actually filed is much smaller.
At the beginning of this year’s tax season, personal finance platform Credit Karma polled the first 250,000 people who filed income taxes using Credit Karma’s tax service. Less than 100 people, or 0.04 percent, reported earnings from trading cryptocurrencies, the poll found. Almost all were first-time filers.
Credit Karma ran the survey again last week, polling the latest 25,000 people who filed taxes, only to find little difference.
While there was an increase in the number of people who filed crypto earnings in the second poll, it remained a tiny fraction of the total, a Credit Karma spokesperson told Observer.
“Now that we’re nearing the end of the tax season, we still see few people are reporting Bitcoin on their taxes,” Jagjit Chawla, general manager of Credit Karma Tax, told Observer. “There’s a good chance that the perceived complexities of reporting cryptocurrency gains are pushing filers to wait until the very last minute,”
Credit Karma’s tax service processed about one million tax filings last year.
Under current tax laws, cryptocurrencies are considered property. That means any cash gains or losses from trading cryptocurrencies should be recorded on tax forms as capital gains or losses. Purchases and payments using cryptocurrencies are also taxable based on the cash value of the transactions.