A student took to Reddit recently asking for advice on how to handle an IRS tax debt of $400K after his crypto investments had bumped and dived.
The young Californian, preferring to remain anonymous, profited like many from investments made towards the end of 2017 when his $5K stake in altcoins brought him a massive return of $880K.
His laptop gamble with Coinbase certainly paid off, but then came the payback after his portfolio sunk to a $125k in the new year. “They really never do teach this stuff” he posted on Reddit when asked if he’d set something by for tax.
The student claimed he’d been trading crypto-to-crypto and that Coinbase didn’t, “ever cash out to fiat and transfer any USD into my bank accounts from these tradings.” Nonetheless, he appears to have convinced himself the IRS is coming calling after receiving a standard Coinbase 1099K form (https://i.imgur.com/1TZuh2B.jpg) warning him that the information regarding his transactions would be forwarded to the Inland Revenue.
It appears he received little sympathy from Reddit users from comments such as, get “a tax professional and stop wasting time trying to get free advice,” to, somewhat philosophical, advice from one user who suggested that his problem “not be a high point in your life, but you will get through it.”
More useful advice suggested that he stay clear of “questionable accounting methods” and get an accountant to work out a suitable tax repayment method -although re-payments to the IRS to the tune of $400k may just impact on his $12/h part-time-job whilst getting through college.
A recent Twitter poll which quizzed US cryptocurrency investors about their tax scenarios revealed that 9% of the 9,339 respondents claimed that they had “already filed and paid,” with 53% far more adventurous claiming, “they’ll never catch me.”
It looks like more clarification is needed regarding paying these kinds of taxes in the US. The IRS Advisory Committee has just requested help in dealing with cryptocurrency taxation in a bid to ease its current $25 billion tax liability. The request for more clarity has come after the IRS published its findings from a report which highlights the current confusion surrounding how to address taxation on cryptocurrency assets in the United States
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