On January 31st a segment of cryptocurrency holders with over 200 transactions on Coinbase with a value of $20,000 or more in 2017, woke up to an unexpected email from Coinbase (one of the largest crypto exchange and wallet platforms) that included the 1099-K forms obliging them to pay the tax man.
Although the company explained that it only sent out the IRS tax forms to clients who exceeded the required threshold last year, GDAX as well as business accounts that sell crypto for cash were also included among those required to give a cut of their earnings to Uncle Sam.
Relief for Miners
However, crypto enthusiasts who have mined proceeds or only transferred their cryptocurrency from one wallet to the other without receiving any payment will breathe a sigh of relief as the tax obligation did not include them.
According to Coinbase, even Uber drivers and Etsy sellers are required to pay IRS taxes. The company stated,
The best data available was used to determine whether your account activity qualifies as Business Use, including but not limited to factors such as completion of a merchant profile or enabling merchant tools.
Are there any Options?
Well, the move obviously sent the crypto community into a furry. Most Coinbase clients complained about not being notified beforehand about their tax obligations while others expressed displeasure over the exorbitant tax rates that they now have to pay. However, Coinbase clients have no other option but to comply with the taxman, considering Coinbase’s reputation for staying out of trouble with the government.
Paying Taxes up to 60%
According to the court ruling back in November, Uncle Sam recognized Bitcoin as property and not currency. This would mean that any Bitcoin holder who might have cashed out when the price of Bitcoin hit 20,000 a few weeks ago now owes the government upwards of $7,000. Absurd right? Well, there is more. Bitcoin holders who have had the cryptocurrency for about a year will be taxed as income while those who have held it for more than a year will pay a whopping 20 percent tax on their capital gains. If you include transaction costs and accounting fees, you pay up to 60% of your gains as tax.
What do you think about reporting your cryptocurrency gains to the government? Will it work in the long run? Share your thoughts and opinions on this matter with us in the comments section