Cryptocurrencies, blockchain, NFT and new trends

Many adherents of crypto can’t figure out how to pay…

Many adherents of crypto can’t figure out how to pay their taxes

Paying crypto taxes is a thorny issue, not just for government, but for those wading through the complexities in order to pay them.

The tax deadline is approaching in the U.S. and many are still trying to get their tax affairs in order. For those who need to file their crypto dealings as well, many are finding the process so complex, that if they don’t have a tax professional adept in this labyrinthine process, they are giving up and are failing to file.

Confusion over how to report crypto gains

The Los Angeles Times published an article on the subject this morning, with part of the title reading:

“It’s a miracle most Americans pay their taxes.”

The opinion article suggests that confusion over the process is deterring many who transact in crypto from complying with tax law, even though they genuinely want to pay. It’s just that they can’t figure out how to do it.

The Los Angeles Times researched into the r/CryptoTax subreddit, which contains many who are looking for ways they can understand their particular crypto problem.

Huge complexity

Many holders and transactors of cryptocurrencies don’t just buy one crypto and sell another. They get into some of the various crypto niches such as staking, farming, lending, borrowing, and others, and by the time the cryptocurrency they originally bought has been through various of these mechanisms, and then sold, the exact gains or losses can be hugely difficult to work out.

According to the article, the IRS has a high dependency on Americans voluntarily reporting their crypto gains. It reports that only 0.25% of taxpayers are audited, and even if some of the under-payers are brought to justice, the fines are not particularly onerous.

Major tax evasion not a problem yet…

With this in mind, it is perhaps surprising that the article concluded that tax evasion wasn’t a huge problem, and one of the reasons given for this was Tax Morale, whereby social norms, as well as thinking that everyone else was paying, was leading to most paying what they owed.

However, it was posited that should people start to see that others weren’t paying their taxes, or if they started to think that the tax system was illegitimate, then they were going to be less likely to comply.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.