Users of Credit Karma’s tax preparation software appear to be under-reporting their cryptocurrency holdings, according to data provided by the company.
Fewer than 100 of the first 250,000 federal tax returns filed using the service reflected cryptocurrency gains or losses, the company reported. A spokesperson told CoinDesk in a statement that the “reporting of bitcoin gains [is] still at negligible levels.”
Further, Credit Karma compared reporting levels from February 2018 and April 2018. Less than 100 people reported bitcoin gains or losses out of the first 250,000 users to file, or roughly 0.04 percent. The spokesperson added:
“With tax deadline less than a week away we reran the analysis and looked at the most recent 250,000 filers on the Credit Karma Tax platform and while we saw a more than 100 percent increase in the rate of those filing, the total remained a tiny fraction with still less than 100 people of the 250,000 having reported gains.”
However, fully 5 percent of Americans reported owning cryptocurrencies in a survey, according to TechCrunch.
The Internal Revenue Service (IRS), the U.S. federal tax agency, considers bitcoin and other cryptocurrencies to be property, meaning that investors who sold cryptocurrency holdings in 2017 – for a gain or loss – need to report those transactions on a Form 8949.
Mining cryptocurrency is also a taxable event, whether or not the resulting holdings are sold. Hard forks resulting in new cryptocurrency holdings, such as the bitcoin cash fork, are taxable in at least some cases, but clear guidance from the IRS is lacking.
While the taxman has left some important questions regarding cryptocurrencies unanswered, however, that isn’t due to a lack of interest. The IRS has employed Chainalysis, a startup that analyzes blockchain transactions, since 2015. The agency explains in documentation related to the contract:
“This is necessary to identify and obtain evidence on individuals using bitcoin to either launder money or conceal income as part of tax fraud or other Federal crimes.”
Image via Shutterstock.
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