Bitcoin investing mania swept the world in late 2017, causing wildly volatile swings and, presumably, eye-popping gains for some.
Yet very few seem to be actually paying taxes on their cryptocurrency windfall.
A stunning report shows that just 100 people out of the 250,000 who have filed taxes this year via Credit Karma have reported cryptocurrency earnings.
To put it in perspective, about 7% of Americans are reportedly invested in, speculating on or holding Bitcoin or other analogous cryptocurrencies.
Yet just 0.04% of Americans who have filed their taxes this year have revealed their cryptocurrency earnings or losses to the IRS.
It’s common knowledge that people in the cryptocurrency investing community can be evasive about their cryptocurrency gains.
Credit Karma said that just one person of out the 100 who reported crypto holdings revealed gains or losses of a “significant” amount.
Credit Karma is the third-largest U.S. tax preparation service. H&R Block is number one, followed by TurboTax. More than 1 million people filed their taxes online via Credit Karma last year.
The Internal Revenue Service increased its scrutiny of Bitcoin transactions as the popularity of the digital currency exploded last year.
The IRS considers cryptocurrency investments and ownership a form of property that must be reported on federal tax returns.
More than 18 million Americans have already filed their taxes, about 13% of all Americans so far. The filing deadline is April 17.
The IRS expects more than 156 million Americans to file their taxes with the agency this year.
Bitcoin investors and speculators defend their evasiveness based on past IRS legal actions.
In 2015, The IRS sued the popular cryptocurrency exchange service Coinbase to gain access to customer records.
This was after the IRS calculated that only about 800 people reported cryptocurrency earnings or losses to the agency
In the fall of 2017, a federal court ordered Coinbase to reveal the identities of more than 14,000 of its customers to the tax authority.
Mike Novogratz, a cryptocurrency investor, billionaire and hedge fund manager, warns nascent and veteran cryptocurrency investors to take paying taxes very seriously.
“When I talk to the blockchain community, I’m always pushing them — I’m like, ‘Dudes, A), pay your taxes.’ Because nobody in that space pays taxes.
“Listen, the IRS is going to come after people. People are making real money now. So the IRS isn’t stupid,” Novogratz said.