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A recent survey conducted by Qualtrics, on behalf of Credit Karma, showed that 35% of U.S. investors who incurred losses after selling their Bitcoin do not plan to report their losses in the upcoming tax season.
The online survey, which was conducted in November 2018, showed that crypto investors in the United States incurred a loss of about $1.7 billion after selling their Bitcoin. Also, the survey capped unrealized losses for investors who are yet to sell at approximately 5.7 billion USD. The online survey was conducted on a total of 1009 American Bitcoin investors from age 18 and above. The aim of the survey was to learn of the total crypto investors in the U.S. and how many investors plan on reporting their gain or losses to the IRS in the coming tax season.
The result of the survey showed that quite a large pool of Bitcoin investors who made both losses and gains are unwilling to report it in the tax season. Due to the grave consequences attached to underreporting one’s income, Credit Karma took the time to uncover the reasons for their decision in its survey.
The survey revealed that a great percentage of the respondents have no idea that trading Bitcoin is taxable under the U.S. tax laws. By extension, they are ignorant of the fact that they can file their losses as deductibles. Although more investors were open to the idea of reporting their losses and gains after learning of its importance, 38% of investors who incurred Bitcoin-related losses chose not to report their loss. While 53% plan to report both losses and gains. However, a tiny fraction of the respondents (19%) claim they are yet to take a decision as to reporting or not.
Further research revealed that 57% of Bitcoin investors who plan not to report made such a decision because they think the values of their gains or losses are too small to report. The survey also highlighted a category (which occupied 22% of the respondent) that claim they decided not to report because they do not know how to report gains or losses. Lastly, a category of Bitcoin investors (holding up to 5% of the total respondents) claim they do not see the need to report because they sold their Bitcoins years ago.
Conclusively, I guess it is safe to say that ignorance is the key factor at play here. The government should create programs to educate Bitcoin investors that they are obligated, as citizens, to report their gross income – which includes gains and losses from Bitcoin transactions – and teach them the process involved in reporting their gains and losses.