The April 18 tax filing deadline is approaching, but many cryptocurrency investors appear to be unprepared to submit taxes on their winnings, according to a recent survey. This information gap may result in incorrectly filed tax returns, resulting in crypto investors paying too much or too little tax.
According to a new CoinTracker survey, 40% of US crypto investors are unaware that paying taxes is necessary when exchanging cryptocurrency for fiat currency – and 48% are unaware that selling or trading an NFT is a taxable transaction. Surprisingly, 96 percent of respondents had not completed their tax returns as of March 27, 2022, probably due to widespread misunderstanding about crypto taxes, according to the survey.
Shehan Chandrasekera, CoinTracker’s head of tax strategy, told GOBankingRates that the revelation that 40% of cryptocurrency investors were unaware of their tax requirements when cashing out is startling. “I would say lack of education and awareness related to crypto taxes are arguably the main contributing factors,” Chandrasekera said.
According to the survey, an overwhelming 84 percent of cryptocurrency investors are not totally satisfied that they know everything they need to know when it comes to calculating taxes on their bitcoin transactions.
“Cryptocurrency taxes are complicated, and especially trying to do them by hand without the support of crypto tax software is a daunting challenge,” Chandrasekera said. “It’s therefore not surprising that the vast majority of cryptocurrency users are unprepared to file their taxes.”
When given a list of probable bitcoin situations that necessitate paying income tax, only 3% of people polled got all of the responses accurate, leaving 97 percent with at least one incorrect answer. For example, 58% are unaware that they must pay taxes when exchanging one type of cryptocurrency for another, or when using cryptocurrencies to purchase a good or service.
One of the most crucial things for crypto investors to understand, according to Chandrasekera, is that cryptocurrencies are taxed as property by the Internal Revenue Service (IRS).
“This guidance has been out since 2014. If you have any taxable events, you should report them on your taxes accurately and pay taxes. If you have cryptocurrency losses, you can claim them on your taxes and receive a higher refund in some cases,” Chandrasekera said.
Cashing out crypto, crypto-to-crypto trades, spending crypto on goods and services, earning crypto (wages, interest, staking, mining money), and crypto airdrops are all common taxable events.
One of the most typical challenges for crypto investors is having to reconcile their crypto activity across exchanges and wallets and calculate the correct capital gains or losses.
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