California Student Owes $400,000 To IRS For Crypto Gains, Staked $5,000 Into $880,000
Reddit seems to the go-to source for this generation whenever they need some help. One recent post showed a request for help with cryptocurrency. After a $5,000 investment from a college student in California skyrocketed to $880,000 in value late last year, he is trying to find someone that can help him deal with the $400,000 in taxes that he needs to pay.
Meant primarily to be used as a way to gamble on Coinbase, the investor was clearly excited to see this success. However, his wealth quickly dropped when the market dropped steeply at the beginning of 2018. As he wrote in the Reddit post, “They really never do teach this stuff,” referring to the lack of preparation for taxation.
As the student puts it, he had just been trading between cryptocurrencies, and there was never any deposit in USD to any of his linked bank accounts from Coinbase. Still, he is under the belief that the IRS is aggressively pursuing him after Coinbase sent him a 1099K form to let him know that the IRS would be notified of his transactions.
Most of the Redditors that responded to the post were not sympathetic, telling the anonymous student that he needed to get “a tax professional and stop wasting time trying to get free advice” or that he will find a way to handle it. One of the more useful pieces of advice is that he needs to be careful about “questionable accounting methods,” and that his accountant should look for a realistic way of paying it back. Considering the current minimum wage in California, the heat of a $400k bill could be a little more than he can afford.
Twitter recently held a poll that asked US investors in cryptocurrency about their adherence to the present regulations in place for cryptocurrency profits. The results showed that only 9% of the 9,339 who responded had “already filed and paid” for their revenue. The majority, which was 53%, had voted for “they’ll never catch me.”
Still, it is clear that the regulatory measures for cryptocurrency have a long way to go, though the IRS Advisory Committee has recently requested assistance in these modifications. The plea for held came after their filed a report, discovering that there is much confusion about the way that cryptocurrency taxed in the first place.