This is based on a true story, but this should not be seen as any form of legal or tax advice. This is based on the laws and regulations in Sweden, so it might be different for you.
I Will Be In Debt For The Rest Of My Life.
*1,000,000 SEK. That's the entire tax debt. All due to cryptocurrencies and taxes.
*1,000,000 SEK is about $113668.
A person from Sweden thought that he had found something that would change his life forever. Financially. But the outcome was the opposite of what he imagined...
It all started back in 2011-2012. He found Bitcoin and was instantly impressed and interested. He quickly joined several internet forums and started to build some sort of relationships with like-minded people. He can't remember exactly, but he think the price of BTC was about $10 or $15 at the time and he didn't have much for starters. As he called it himself, he was just "fooling around" with wallets and did some minor mining on his laptop.
What really caught him, was the trading. He had never done any trading before Bitcoin and he had never bought or sold shares in any form. He had no prior experience at all, because he had never tried to understand what it was all about.
"An amazing world of graphs, mean values and candlesticks opened. I read book after book about trading and markets. I always had Bloomberg TV on in the background to fill the entire room with the right feeling. I loved it. The opportunity to make the big bucks, became a reality that got closer and closer."
"Besides the monetary driving force the interest for technology started to rise. I built my own miners, bought graphics cards and talked with like-minded people on a daily basis."
"I truly loved it. All the late nights, the smell and sound of the hard working graphics cards and all the tweaking of hard- and software."
"I calculated electricity prices and kilowatt hours, and I even got so far that I had started to talk with electronic-firms about deals to buy graphics cards in bulk for a discount."
"I even had a guy on Iceland who would co-host my rigs, but I pulled out at the last minute."
"That being said, it was the trading that really caught my interest. My portfolio quickly went up and down, sometimes more than thousands of dollars. I didn't care about it though, because it always bounced back again."
"I learned literally everything I could about margin trading, stop-loss, blanking and all the terminology. I even tried FX-trading but quickly realized that it wasn't worth it for me."
"I realized with time that one could "flip" Bitcoins. Buy low and sell high. I found a website that had automated the entire process and had a 15% spread. The only thing I had to do, was to transfer BTC to the website and they sent them to client who needed BTC quickly, for a higher cost."
"This went on for a few months but it wasn't a good option in the long run. People started to pull off all type of scams, filed disputes to PayPal and so on. PayPal shortly shutdown my account, so it ended there."
"The ICO-rush started for real and that was an amazing period. Utterly useless ideas could get several millions of dollars in matter of hours and it was literally raining money. Money where everywhere... In the middle of this gold-rush, I got that itching feeling about going to Skatteverket (IRS).
"Many people thought that it was a really bad idea, but I wasn't that typical "hardcore fuck the system" type of guy, and I wanted to be as legit as I could... But I never knew what was coming."
He tried to find an accountant for some time and he had already made some calculations for how much he would need to pay in taxes. He based the entire thing on how much he had bought and sold, which to me, and probably many others, sounds logical. He made calculations for profit and losses, as he thought he'd be able to figure out the taxes by doing that. It was a logical guesstimation so to speak.
According to Skatteverket in Sweden (IRS), cryptocurrencies didn't count as a currency, it was an asset. He figured that it wouldn't matter much, as he still had all these numbers, but it did.
So, for all of you who have the 1,000,000 SEK in your mind, ($113668), probably understand that the profit must have been very decent to say the least, and that the turnover was rather high.
"This came like a lightning from clear sky. I could never, ever, have imagined these enormous amounts." - He says.
For each buy and/or sell, you're obligated to pay taxes, so you need to put aside 30% of the profits for each trade you do. He wasn't aware of this and he also had bots that automatically traded 24/7.
So, he was literally trading with tax credit, which he continued to put in on his profits. He continued to invest the earnings, straight back into the system, to grow even more... The price of BTC went up and he continued to buy and sell...
- And when the prices declined, the tax debt was still there.
He still can't understand how it all came to this. His portfolio was never near the gain he apparently did...
As it is right now, his only option is to wait for the debt to become passive. With 16.25% interest rate, and if he lives until he is 80 years old, he will have a passive debt of anything between 25-30 million SEK...
- That's $2845250-$3414300.