A new report reveals only a small minority of tax returns include reports on cryptocurrency gains and losses
Bitcoin fever struck hard among investors last year; for Canadian crypto bugs, that could mean immediate tax consequences depending on what the CRA thinks. But south of the border, it seems the government has yet to get its cut from the crypto rush.
US-based Credit Karma Tax reported on Tuesday that fewer than 100 of 250,000 federal tax returns filed through the company — less than 0.04% — have included a Form 8949 for cryptocurrency gains and losses, according to CNBC.
“Generally, Americans with more complex tax situations file later in the tax season,” said Credit Karma Tax General Manager Jagjit Chawla. “However, given the popularity of Bitcoin and cryptocurrencies in 2017, we'd expect more people to be reporting.”
The company said millennials account for 52% of its filers this season, and only 14% are at least age 55.
According to Brandon Williams, a former investment banker who has been trading cryptocurrencies independently for the last two years, the lack of cryptocurrency tax filings “emphasizes the difficulty in accurately reporting your crypto gains and losses.”
Williams reportedly executes more than two cryptocurrency trades daily, which he records using an online service called CoinTracking. He told CNBC that because of the volume and volatility of digital currencies, the time needed to note trading gains and losses can add up to a minimum of three hours every two weeks.
The US Internal Revenue Service (IRS) treats cryptocurrencies as property. It therefore sees each transaction where one cryptocurrency is traded for another as a taxable event; in its eyes, a piece of property has been sold for cash, which is then used to buy the other cryptocurrency. The agency has said income from mining bitcoin is also taxable.
Williams argued that the current treatment of cryptocurrencies as property rather than currency is “almost a deterrent in [the] pursuit of mainstream adoption.” He said he would “wait closer to April [to file] in case there's more visibility and definition from the IRS about what would be acceptable.”
In a November poll conducted by Pollfish for LendEDU, slightly more than a third of respondents said they did not plan to report their bitcoin transactions to the IRS, reported CNBC. Out of the 564 American adult consumers who responded, some 64% said they planned to report or have already reported their bitcoin transactions.
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