Only 802 People Paid Taxes on Bitcoin Profits, IRS Says

[alyssa85]

https://cointelegraph.com/news/only-802-people-paid-taxes-on-bitcoin-profits-irs-says

Talk about investing in Bitcoin and the news of people becoming ‘bitcoinnaires’ are almost everywhere these days – newspapers, TV’s, radio, and the Internet. However, one thing is missing from these stories: the tax man.
Yes, Virginia, Bitcoin is taxable

The IRS began issuing guidance on taxation of Bitcoin in March 2014. At that time, the agency announced that Bitcoin would be treated as property, with loss or gains being treated as capital loss or capital gains for tax purposes.

Readers are probably familiar with the many “rags-to-riches” stories about Bitcoin investors becoming millionaires almost overnight. Such stories abound, from the Idaho teenager who turned $1,000 into $1.1 mln and the Norwegian engineer who made $800,000 in profit off a $24 investment.

None of these stories mention the taxes these individuals paid...or didn’t pay.

Given Bitcoin’s crypto-anarchist roots, it’s perhaps not surprising that some seem to take the idea of taxation lightly. Many believe that since Bitcoin is pseudo-anonymous, there’s no way the IRS will find out about their taxable gains. Yet they may be wrong.

Bitcoin isn’t as anonymous as many think, as evidenced by the number of people in federal prison who paid in Bitcoin for child pornography or illegal drugs. There are a number of companies that scour the Blockchain, seeking to link Bitcoin accounts to their actual owners.

Earlier this month, the IRS was found to have been partnering with a company called Chainalysis to double down on its efforts to monitor Bitcoin traders who engage in high frequency and volume trading.

The IRS has recently been focusing on Coinbase, demanding that the exchange reveal the identity of anybody who traded more than $20,000 in Bitcoin per year between 2013 and 2015. The IRS is probably correct in their belief that many Bitcoin owners are evading taxes. In the year 2015, only 802 Americans told the IRS about their Bitcoin-related capital gains or losses, according to Fortune.

 

[alyssa85]

I don't understand why would we must pay for our investment and how do they tax cryptocurrency investment. Besides not every people treat bitcoin as property/investment, in fact people could say they exchange fiat to BTC and suddenly BTC value increasing

According to US law, they can be taxed on capital gains (in the same way as if you bought and sold stock that went up).

Of course the low numbers of people paying tax on bitcoin might reflect the bear market from 2014 to 2016. But all those people boasting in the press about how rich they are are bound to raise the suspicions of the taxman.