Node40, a developer of bitcoin tax-reporting software, expects the U.S. Internal Revenue Service (IRS) to receive a record number of cryptocurrency-related tax return claims this year, as it predicts that many investors will decide to declare their losses.
Pros and Cons of Reporting
Cryptocurrency traders hit by considerable price declines in 2018 now have a strong incentive to report their activities to the authorities, in order to offset their losses against other tax liabilities. However, Node40 warns that doing so could have long-term consequences for investors. For example, if an individual reports particularly high losses, they may be questioned about where the money came from to begin with.
“It is clear that, with the huge falls in cryptocurrency markets during 2018, many people will be weighing up whether this is a good opportunity to reveal the losses they have suffered,” said Perry Woodin, co-founder of Node40. “Having not reported their crypto activity up to now though, those choosing to reveal losses this year will need to report their crypto positions every year from now on, giving the tax authorities much better visibility of people’s crypto involvement.”
What You Need to Know