Virtually Nobody Is Reporting Crypto Profits To The IRS

Despite the IRS's victory late last year in a lawsuit against Coinbase - the most popular cryptocurrency exchange in the US - that forced the organization to hand over transaction data pertaining to more than 14,000 users, surprisingly few Americans are reporting income from cryptocurrency trading as income this tax season.

That's even more surprising considering the astronomical gains realized, not just by bitcoin, but by dozens of coins.

Fewer than 100 people out of the 250,000 who have already filed federal taxes this year through Credit Karma reported a cryptocurrency transaction, Reuters reported Tuesday.

This, despite nearly 57% of the 2000 Americans surveyed by the credit score startup and research firm Qualtrics last month saying they had realized some gains from cryptocurrencies last year, according to a Credit Karma study. About the same percentage of respondents said they had never reported a crypto transaction to the IRS. Meanwhile, about half said they understood how cryptocurrency gains might impact their taxes.


As Reuters explains, the IRS considers cryptocurrencies to be property for federal tax purposes, meaning any profits or losses from the sale or exchange of the virtual coins must be reported as capital gains or losses. Still, it remains unclear exactly how many Americans hold cryptocurrencies, which were initially designed to protect the identities of their holders and can be difficult for federal authorities to trace. Coinbase famously surpassed retail brokerage Charles Schwab in terms of the number of accounts last year, but its unclear how many of those accounts are actively trading.

However, there could be a more innocuous explanation than widespread tax dodging. Jagjit Chawla, general manager for Credit Karma Tax, said the company was not too surprised that few people had reported cryptocurrency gains as Americans with more complex tax situations tend to file closer to the deadline.

"However, given the popularity of bitcoin and cryptocurrencies in 2017, we’d expect more people to be reporting," Chawla said in a statement.

That, or even simpler: most of those reporting cryptoprofits for public survey purposes are lying.

Around one million people filed their taxes with Credit Karma last year, the company said. The IRS expects 156 million individuals to file taxes this year.

As we explained last year, because every cryptocurrency transaction exists on a public blockchain ledger, an enterprising organization - say like the NSA or IRS - could conceivably implement blockchain analysis tools to track down Bitcoin fund transfers around the globe. Moreover, most exchanges now require a driver’s license, passport and even a phone number in order to approve your account for trading.


natronic Tue, 02/13/2018 - 08:38 Permalink

Lots of us just got in and haven't cashed out yet.

And no I'm not reporting a taxable event on crypto to crypto trade, only when I cash out.

HenryKissinger… philipat Tue, 02/13/2018 - 08:51 Permalink

didn't Davos 2018 order the destruction of bitcoin ?

"Every digital payment service should abide by KYC and cooperate in all law enforcement initiatives regarding cybercrime conspiracy, or it should be shut down. .. Virtual currencies who refuse to know their customers or freeze accounts of those engaged in criminal conspiracies should be subject to Treasury Executive Office for Asset Forfeiture (TEOAF)." DAVOS 2018…

In reply to by philipat

pods rrrr Tue, 02/13/2018 - 09:15 Permalink

I will report mine when I cash out. But I will damn well deduct all costs associated with obtaining them.

Some cryptos are designed to protect users identities, but that matters little when they are sold on an exchange. Once P2P decentralized exchanges becomes commonplace these coins will allow anonymity for both parties.  A true functioning system outside of the Eye of Sauron.

The more they pressure the exchanges, the faster they push cryptos towards decentralized P2P exchanges and they will lose their golden goose.

Of course, it will make everyone involved criminals, but at this point, we can just say we are emulating those at the highest levels in our government, right?


In reply to by rrrr

Abaco philipat Tue, 02/13/2018 - 09:45 Permalink

Sort of. If you buy on an exchange that is recorded in the block chain and can be linked to you. If you transfer the balance to another account and on to another those transactions can be traced but they cannot be linked to you. If you cash on an exchange that transaction can be traced to you.  However, if you purchased a small farm and the purchase contract said 1$ and other consideration it would be difficult to link that to you.  The feds would need to know what you bought and who you bought it from and then be able to link the crypto payment to the seller.  Tough to do. Pretty much impossible to do if the item purchased isn't on some sort of registry (i.e. county title records).

Buy PM's, ammo, food, fuel, etc. with crypto and it can't easily be traced. They would have to be able to link an IP to the transaction and then link you to the IP. That can be worked around in a face to face transfer.

The feds are lawless tyrants. Resist them.

In reply to by philipat

Hal n back tmosley Tue, 02/13/2018 - 08:56 Permalink

This is simple:

those that did realize profits, owe taxes if and when they report--as they did not pay in estimated tax.

If someone had a windfall, say just 300,000 in  income, its a huge tax and they just do not want to pay it so they defer the decision to file their returns.

I'll wait til after April 17th to see what happens.

now, if they do not report the income and the IRS learns they have the income, oh, in say 3 years, they owe penalties and interest which will drive them up a wall. Then if they have losses say in the market they are in a position to be without money  for teh gains in 2017, which are not off settable for losses in 2020.

now an unfairness: we all have to report gains but if I have massive losses in say 2020, I can only deduct 3,000 of losses, but I can carry foreward the losses to gains years assuming  have gains years

this last paragraph is what the media bitched about Trump during campaign when they said he paid no taxes. His losses were so large in one year around 1993, he was able to offset them in future years

the media and politics is all about putting erroneous  things in people minds. Too many in the US want things their own way at any cost.


In reply to by tmosley

ultraticum Hal n back Tue, 02/13/2018 - 09:07 Permalink

How can the USSA bomb the shit out of the rest of the world and fund the leviathon if they can't steal your money at gunpoint?


And . . . how can anybody practically track their "capital gains" on purchases of coffee, t-shirts, etc.?


Meanwhile, the Feds are putting people in cages for violations of "money transmitter" laws and Secretary Munchkin says it'd be like allowing people to have numbered Swiss bank accounts. 


So, is it property or is it money? 

In reply to by Hal n back

rrrr Hal n back Tue, 02/13/2018 - 09:18 Permalink

I watch the national TV news every evening, mostly to find out what lies they are telling now. Their deceit consists primarily of leaving things out. They sometimes misuse words in ways that enable false impressions. And they often focus on true facts in ways that imply support for their own biased view.

In reply to by Hal n back

Antifaschistische Hal n back Tue, 02/13/2018 - 09:31 Permalink

What will eventually come of this?  Not sure.

The IRS could quite easily require all exchanges to report a 1099-CRY (for crypto).

You want me to tell you (from multiple up my butt IRS audits) what will happen if they smell a sell when they do not have the complementing buy transaction information?

Yes...your cost basis is ZERO!!   So if they sniff out a $300,000 sale, they drop that $300k directly into income with no offsetting cost.  The rest will be your burden to prove.

In reply to by Hal n back

Abaco pods Tue, 02/13/2018 - 10:31 Permalink

They exercise power unlawfully.  They will continue to do so in more extreme fashion until they are resisted. Tyranny only continues as long as everyone submits.  Everyone submits because they don't want to pay the price of freedom. I am amazed at how quickly liberty has vanished and tyranny has thrived in the US. I have grandkids and shudder to think of the world they will inherit because we cowered while these criminals threatened us. The choice today is to sell out your children and grandchildren or to resist these tyrants. They do NOT have the law on their side. They are criminals.

The question of statutory authority is the wrong question even if Bannister is correct. The feds do not have CONSTITUTIONAL authority and therefore any statutory authority is null.  While it is true that the feds have the authority to tax income that does not mean they have the authority to do so as a direct tax that is not collected from the states rather than the individual. It does not mean that they have lawful authority to require reporting.  Any such requirement is a negation of the 4th amendment and, as such, is void.

You will not find an attorney willing to make these arguments even though they are airtight by the rules of logic. This is because attorney's are officers of the government plying their trade at the pleasure of the government. You will not likely find judges willing to permit these arguments to be made for the very same reason.  Attorney's and judges are coopted - dependent as they are for their living on the permission of their government overlords.

Unless and until the American people refuse to submit to this tyranny it will strengthen. We should all refuse ti file, refuse to pay, and refuse to convict. While we are at it we should ridicule, revile, and ostra.cize every federal employee

In reply to by pods

pods Abaco Tue, 02/13/2018 - 11:51 Permalink

I used to be where you are now.  And you have grandkids?  I got burnt out from the stress of it all and I am still young.  I think I have read every page on this site:


The system we are living in is a farce. A true matrix.  I just became overwhelmed. And trying to do anything actionable from this knowledge is difficult.


In reply to by Abaco

pods PrivetHedge Tue, 02/13/2018 - 13:53 Permalink

I've been there. Circa 2008. I have read all about UCC, reservation of rights. different kinds of courts, etc.  

What I realized the most, is that extricating yourself from this system is difficult, and there are a myriad number of ways for them to re-ensnare you.

Chumba did this. Ask him how much energy it took him.  He went all in. Court of Record, etc.

I would love to be able to do what many have done. I simply don't have the time and energy right now to do so. So I merely try and reduce my tax exposure as best as I can.  With only 1 salary in a 4 person family (done for different reasons though), my tax liability isn't nearly what others pay.


In reply to by PrivetHedge

HRClinton Antifaschistische Tue, 02/13/2018 - 10:20 Permalink

If. If you are a "US Person", and converted CC into (((their))) fiat, then you "owe" Extortion Fees, aka Taxes. Otherwise you don't. 

If, say, you are in a position where you might face this Windfall Tax, then you can always avoid it legally, by moving to a TFJ (Tax Friendly Jurisdiction) for a while.

The point is, there are numerous legal ways of playing the Procedure game (i.e. of staying within the Tax Plantation rules), if you have the imagination and will to do so. If not... then you forking pay -- deservedly so, for being "willfully dumb".

In reply to by Antifaschistische