99% of crypto investors don’t pay taxes? What could happen!
11 May, 2023 · 3 min read
A new study revealed that over 99% of crypto investors did not pay crypto taxes last year. Is that true?
In this article, we cover more about the conclusions of that study and explore the consequences of not submitting and paying crypto taxes as an investor. Discover more!
Are crypto investors not paying crypto taxes?
A new study by a Swedish crypto tax firm hints that over 99 percent of crypto investors have not paid crypto taxes.
The study evaluated “the number of people who declared cryptocurrency in their tax returns and the search volume for crypto tax-related keywords in various countries.”
For example, the research argues that only 1.62% of crypto investors in the United States paid taxes. According to the study, investors in Finland, Australia, Austria, Germany, and the UK paid crypto taxes at a higher rate. If this is true, let’s cover what could happen to investors.
Is crypto taxed in the US?
Trading cryptocurrencies in the US is taxed in several ways, with crypto investors having to submit and pay taxes on gains and income.
If you trade cryptocurrencies for FIAT (e.g., USD) or other cryptocurrencies (including NFTs), you’d be taxed at a capital gains tax level.
If you hold your crypto for 12 months or less before selling, you’d be taxed at a short-term capital gains tax rate, ranging from 10% to 37%. If you hold your crypto for over 12 months, you’d be taxed at a long-term capital gains tax level, ranging from 0% to 20%.
If you earn crypto income from activities like hard forks, crypto interest products, staking rewards, airdrops, or salaries, you’d be taxed at the income level.
Is crypto taxed in other countries?
Yes. Countries mentioned in this study, like Australia, Germany, the UK, and Austria, tax cryptocurrencies. Investors have the obligation to comply with the tax laws in those countries and submit their crypto taxes.
If you’re looking for native content on crypto taxes, check our crypto guides for Germany, Australia, the UK, and Austria.
Do you have to report crypto if you don’t sell?
In the US, you have to report cryptocurrencies that you don’t sell when you receive them from airdrops, hard forks, interest products, staking rewards, commissions, or salaries.
When you receive those new cryptocurrencies, you’d have to report them on your US Individual income tax return as income.
What happens if you don’t file cryptocurrency on taxes?
If you don’t submit and pay your crypto taxes, you may receive tax notices from authorities with tax amounts due. You must track your crypto and report it correctly in countries like the US.
If you don’t report your crypto taxes, you could face other penalties.
Can the IRS track crypto?
Yes, the IRS and other tax authorities worldwide have the ability, workforce, and tools to track crypto and identify taxpayers that may not have reported or misreported their crypto transactions.
How to report crypto taxes?
In the US, you have to answer the crypto question on Form 1040, report your gains/losses on crypto trading, and report crypto income.
You have to answer the crypto question (yes or no) on Form 1040: “At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
If you trade any crypto (including NFTs), you have to report all the gains/losses separated by their holding period on Form 8949 and Schedule D of your Form 1040.
If you earned any income from crypto, you have to report it on your US Individual Income Tax Return.
The best tax tool for report your crypto taxes: CoinTracking
The best crypto tax tool is CoinTracking.
You can import your crypto trades, track your gains/losses, and generate tax reports. CoinTracking is your full crypto tax software, enabling:
- Importing (API & CSV) your trades from 110+ exchanges.
- DeFi and NFT support!
- Advanced reports, including which Coins offer you a tax-free rate.
- Automatic Capital Gains, according to several accounting methods (e.g., FIFO, LIFO, HMRC, ACB)
- Compliant Tax Reports
Have an expert do your crypto taxes: CoinTracking Full-Service
CoinTracking also offers a Full Service for US crypto investors. A crypto reconciliation tax expert from Polygon Advisory Group, a leading US crypto tax firm, will review your CoinTracking account, help fix any errors, and ensure you submit your crypto tax reports error-free.
This post is part of the Crypto Taxes AMA series. Follow our weekly AMAs on Twitter where our expert CPA, Sharon Yip answers your crypto tax questions.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.