The huge cryptocurrency boom of 2017 led to rise of investment chances for many people, as value of cryptocurrencies rose at meteoric levels. The boom was signaled by bitcoin, the flagship cryptocurrency that blasted from $1,000 to more than $19,000 in December 2017.
Users who cashed out during the soaring season in previous year unintentionally racked up tax bills to the wave of thousands of dollars. A good example is the Reddit user (Thoway) who received an IRS tax form demanding approximately $50,000.
Thoway is a Reddit user who claims to have received a tax bill from the U.S. tax agency (IRS) whereby the government agency has demanded accumulated amount of $50,000 as taxes from him. The Redditor says he possessed eight Bitcoin for $7,200 at the beginning of 2017, and in December 2017, he cashed them out, when the cryptocurrency value had skyrocketed.
Further, Thoway adds that he feels he has trashed his life since he went out to carry out various investments before giving a second thought to taxes and risks associated with cryptocurrency trade. Thoway mentions of earning approximately $47,000 per year working as an office assistant, and he is doesn’t have enough money to cater for such a high tax bill.
It is now a reality that IRS views cryptocurrency as property, and it’s because of that reason that trading in digital currency in countries such as U.S. you have to encounter a high tax rate. Last year, the rate of bitcoin appreciated hence attracting an increased tax rate. After analyzing all state and federal taxes, Thoway stated that IRS confirmed that he has to pay $50,000.
Thoway elaborates how he was caught up in the dilemma last year, and instead of saving part of the gains, he reinvested approximately $120,000, in various digital currencies altcoins, with the hope of gaining a ‘bigger windfall’.
However, the present crypto market has not been doing well, and Thoway’s total altcoins investments don’t even exceed $30,000 in value. He adds that if he has to sell all the altcoins he possesses, still he would not be able to clear the tax bill, because he has merely $5,000 in personal savings which leaves him $15,000 short to pay the bill.
Financial and tax analysts urge cryptocurrency investors to save part of their earnings because they will help them from getting stumped in the future when governments around the globe start asking for taxes on cryptocurrency activities they engage into.
