US investors who recently sold their Bitcoin suffered losses of nearly $1.7 billion this past year.
Many relatively new investors in the cryptocurrency markets suffered considerable losses due to the persistence of the cryptocurrency market downturn at the end of 2017, after Bitcoin peaked at close to $20,000 a few weeks prior.
Undeclared losses in the USA
Losses in the United States resulting from this decline are tax-deductible. However, according to a recent report, most investors who sold their Bitcoin at a loss have not deducted them from this year's taxes.
The report surveyed over 1,000 US investors at the end of 2018 and collected data on losses made from previous estimates. Unsurprisingly, many investors fail to consider the fact that the sale of cryptocurrency (for a profit or a loss) is taxable, and that failure to report it could lead to audits that would then require investors to pay penalties. Bitcoin sales in 2018 amounted to a staggering combined loss of about $ 1.7 billion. Unrealized losses of Bitcoin investors who have not yet sold their cryptocurrency are even higher, amounting to about $5.7 billion. On average, each trader would have lost about $718. The report highlights the fact that more than a third of investors do not intend to report their cryptographic gains or losses.
Lack of awareness on crypto trading
"Among US Bitcoin investors who do not intend to report sales, 35% mistakenly think they are not obliged to report their gains or losses in bitcoin investments",
This is mainly due to the great uncertainty as to how investors should report their cryptocurrency transactions. For example, more than half of the surveyed Bitcoin investors had not even realized they could claim a deduction for their losses. Over 20% said they did not know how to report on profits, realised and unrealised losses. Once aware they were entitled to a tax deduction, about 58% of traders who realised profit and 53% who had realised losses said they were more likely to report on their taxes now that they were better acquainted with the rules and regulations.
The IRS’s responsibility
This report shows the need to raise public awareness on trading and investing in cryptocurrencies. By informing them of their obligations and duties as well as their rights, many issues with authorities could thus be avoided. As long as the Internal Revenue Service (IRS) has not begun to offer investors more insight on how to report profits and losses and severely punish individuals who do not declare their cryptographic trading activities, it is likely that many investors will continue to avoid reporting their Bitcoin transactions.
