Cryptocurrency

A study has found that only a tiny percent of people have reported their cryptocurrency gains and losses to the Internal Revenue Service (IRS) so far this year.

According to Credit Karma, a free credit monitoring app, fewer than 100 people, out of the 250,000 who have already filed their federal taxes this year through the company, disclosed a digital currency transaction to Uncle Sam, reports Reuters.

This is notable considering a preliminary survey conducted last month by Qualtrics, a credit score startup and research firm, found that 57 percent of the 2,000 Americans surveyed indicated that they had made some gains with digital currencies. Of those questioned, though, 59 percent said that they had never reported these taxable gains to the IRS.

Jagjit Chawla, General Manager for Credit Karma Tax, said that the results weren’t too surprising:

“While so few people have reported Bitcoin and other cryptocurrency gains or losses, we’re not surprised. Generally, Americans with more complex tax situations file later in the tax season, especially if they expect that they’ll owe money. However, given the popularity of Bitcoin and cryptocurrencies in 2017, we’d expect more people to be reporting. We encourage anyone who thinks they may have cryptocurrency-related gains or losses to visit Credit Karma Tax and take advantage of the resources we have available for them.”

In a bid to gain access to the records of cryptocurrency investors, the IRS successfully sued digital currency exchange Coinbase in November. As a result, a federal court judge ordered the San Francisco-based company to comply with a summons that required it to identify 14,355 accounts.

The order, covering transactions between 2013 and 2015, was the result of an on-going battle between the two when the IRS initially ordered Coinbase to hand over the personal information of more than one million accounts.

Even though the cryptocurrency community has been evasive about any profits they’ve made, plenty will have made gains after a surge in bitcoin’s price last year. At present, it now costs just under $8,600 to purchase one bitcoin. Notably, though, digital currency investors are saying that traders need to comply with the IRS.

Speaking at a CB Insights’ Future of Fintech conference in June, Mike Novogratz, former hedge fund manager at Fortress Investment Group, and now CEO of Galaxy Digital, said:

When I talk to the blockchain community, I’m always pushing [them], I’m like, “Dude, A, pay your taxes.’ Because nobody in that space pays taxes. Listen, the IRS is gonna come after people. People are making real money now and the IRS isn’t stupid.

The IRS project that around 156 million people will file their federal taxes this year.  Even though it’s still early in the year, so far the IRS has received just over 18.3 million tax returns. Last year, around one million people filed their taxes with Credit Karma’s services.

Additionally, Jagjit wanted me to share the following tips that our readers may find helpful:

  • Cryptocurrencies are considered property by the IRS. The IRS considers anytime someone buys, sells, trades or mines a cryptocurrency a taxable event.
  • How long someone held onto their Bitcoin or other cryptocurrency can affect their tax liability:
    • If you held cryptocurrency for more than a year, you’re likely looking at long-term capital gains or losses.
    • If you held your cryptocurrency for less time, you could be looking at short-term capital gain or losses.
    • The tax rate on most net capital gains generally won’t be higher than 15 percent for most taxpayers.
  • It’s important to accurately track all your cryptocurrency trades and record the value of each current fair market value (in U.S. dollars) and the dates of receipt, as this information can help you report your cryptocurrency transactions on Form 8949 and Schedule D.

Edit, 1354 CST: Updated comment from Jagjit.

Featured image from Shutterstock.

coinbase

Bitcoin exchange and brokerage service Coinbase is back online following multiple outages that forced the company to suspend trading on Friday as the cryptocurrency markets endured their worst correction in at least a month.

Seemingly out of nowhere, the entire cryptocurrency market entered a severe corrective phase on Thursday, sending nearly every top 100 coin and token into a tailspin and spurring investors with weak hands to scramble toward the exits.

bitcoin price
Source: BitcoinWisdom/Bitfinex

Unfortunately, many traders were greeted with a message that has become all too familiar when they logged into their Coinbase accounts on Friday:

“Due to today’s high traffic, buys and sells may be intermittently offline. We’re working on restoring full availability as soon as possible,” a statement on the Coinbase website read this morning.

According to the company’s status page, the exchange suffered from two trading suspensions during the height of the frenzy, each lasting approximately one hour.

coinbase
Source: Coinbase

This was just the latest public relations headache for Coinbase, which is far and away the most popular cryptocurrency brokerage service in the US but has struggled to scale its operations to match rising consumer demand.

The company has suffered persistent outages throughout the year, including one as recently as yesterday, but the company has also incurred the ire of some bitcoin diehards for its support of the contentious SegWit2x scaling proposal, as well as its seeming reluctance to implement Segregated Witness (SegWit) now that it has been activated on the Bitcoin network.

Just this week, Coinbase garnered significant criticism for its messy rollout of support for bitcoin cash that saw the company suspend trading just minutes after its launch and many community members accuse employees of engaging in insider trading.

As of 4 p.m. ET, Coinbase’s trading platform had been operational for three consecutive hours, likely because traffic congestion tapered as the bitcoin price leveled out.

After dipping as low as $10,700 on Bitfinex, the bitcoin price appeared to recover to a point of relative stability, and at press time it was trading at a global average of $13,744, according to the BlockExplorer Bitcoin Price Index.

Featured Image from Pexels

coinbase

Bitcoin exchanges Coinbase and GDAX added full support for bitcoin cash on Tuesday evening, and the rollout did not go smoothly.

Bitcoin Cash Price Explodes After Coinbase Listing

Earlier today, Coinbase announced in a blog post that it had added full support for bitcoin cash, the third-largest cryptocurrency by market cap, enabling users to buy, sell, send, and receive the coin on both Coinbase and GDAX, its professional trading platform. Customers who had coins stored on the exchanges at the time of the fork also received access to their airdropped funds.

The bitcoin cash price surged to record levels in response to the announcement, reflecting the fact that Coinbase’s brokerage service is one of the primary ways in which new users in many countries — the U.S. in particular — purchase cryptocurrency. Some analysts attribute the recent litecoin and ethereum rallies, for instance, to their presence on Coinbase amid an explosion of new user registrations.

bitcoin cash price
Source; CoinMarketCap

Within hours, the global average bitcoin cash price had jumped from $2,300 to $3,000, and it swelled as high as $3,813 before settling down to a present value of $3,224, according to the BlockExplorer price index. This movement represented a single-day increase of 47 percent and lifted bitcoin cash’s market cap to nearly $55 billion.

A Messy Rollout

The news was a huge boon for bitcoin cash proponents, as it further cemented the coin as a top-tier cryptocurrency and made it more accessible to new investors, many of whom likely remain unfamiliar with it.

However, for the company, the rollout could not have gone much worse.

Coinbase’s pricing data comes from GDAX, where the bitcoin cash price quickly — and inexplicably — shot up to $8,500 before the exchange shut down BCH trading and cleared the order books just minutes after their launch.

bitcoin cash price
Source: Coinbase

At press time, GDAX’s BCH markets remained offline, with the last posted trade priced at $9,500. Coinbase, however,  had adjusted the bitcoin cash price down to $3,193, a level that corresponded to the global average.

The rollout left users confused — and enraged — and scores of frustrated users took to social media channels to vow that they would cease to use either Coinbase or GDAX.

It is likely that cooler heads will prevail once GDAX corrects whatever issue caused the price to leap to $9,500 and launches stable BCH markets. Nevertheless, the incident marks yet another public relations headache for Coinbase following a year of unprecedented expansion that has been accompanied by significant growing pains.

Featured Image from Pexels

The Global Digital Asset Exchange (GDAX) is a trading platform launched by Coinbase.com in May of 2016. GDAX trades Bitcoin (BTC), Ether (ETH), and Litecoin (LTC), and accepts USD, EUR, and GBP Deposits. GDAX owned by the Coinbase Inc, which is based in San Francisco, California.

GDAX is suited to the needs of traders with mid-level experience in crypto trading, as well as institutional and professional investors. GDAX is fairly easy to understand once you get the hang of it, but may be slightly confusing for a first time trader. Customer USD funds in GDAX are FDIC insured, meaning your balance up to $250,000 is protected.

GDAX currently ranks #3 on the BlockExplorer Top 25 Cryptocurrency Exchanges List.

GDAX Bitcoin Exchange Summary:

gdax cryptoName: GDAX
URL: https://www.gdax.com/
Total trading pairs: 9
Founded: 2016
Deposit fees: no
Withdrawal fees: no
Trading fees: 0.00% – 0.25%
Margin trading: yes
USA accepted: yes
Verification levels and withdrawal limits:

Verification Level

Limits

Verified Algorithmic

GDAX Exchange Verification Process:

Users who are already registered on Coinbase don’t have to create an account from scratch and can log in with their Coinbase credentials.

GDAX has two levels of verification. Note: They do not have an unverified tier available for use. Verification is required, and users are not allowed to deposit or trade until the verification is completed.

The verification process is straightforward and is different depending on the country. This is due to the differing regulatory atmospheres in different countries. Some are friendly and some are not. In fact, in some countries, like the United States (US), there are differing regulations depending on state.

US users will need to provide a copy of their driver’s license, residential address, and SSN. Please note that GDAX isn’t currently allowing every American state so they won’t accept US passports as an identification document, they need to see and verify what state you are living in to be compliant. As noted previously, some American states are not allowed. US states not yet supported by GDAX include Wyoming, Hawaii, and Minnesota.

UK users will need a photo of an ID card, driver’s license or Passport as well answers to several identity questions

Users from other countries such as Singapore, Australia, Canada and European countries are required to provide a photo of an ID card, driver’s license or Passport and another photo of a different ID document.

Once you are verified: Happy trading!

coinbase

A U.S. District Court judge has ordered bitcoin exchange Coinbase to provide the Internal Revenue Service (IRS) with the transaction records of more than 14,000 customer accounts.

The ruling (PDF), which was filed in the Northern District of California’s San Francisco courthouse, compels Coinbase to provide the IRS with customer records for accounts that had at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any single year from 2013 to 2015. Coinbase estimates that 14,355 accounts will fall subject to the purview of the summons.

Since the IRS classifies cryptocurrency as property, all cryptocurrency holdings are subject to capital gains taxes at the time of disposition. However, the IRS claims that virtually no U.S. taxpayers have reported bitcoin-related investment income on their annual tax returns. Armed with this data, the agency will be able to identify and levy penalties against investors who have skirted their legal obligations to pay taxes on their bitcoin investments, and — in some cases — prosecute offenders for tax evasion.

“That only 800 to 900 taxpayers reported gains related to bitcoin in each of the relevant years and that more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of bitcoin in a given year suggests that many Coinbase users may not be reporting their bitcoin gains,” U.S. Magistrate Judge Jacqueline Scott Corley wrote in her ruling. “The IRS has a legitimate interest in investigating these taxpayers.”

The ruling did not come as a surprise. Earlier this month, the judge told Coinbase in a hearing that she was inclined to “give tremendous discretion to the agency as to how they investigate” whether people are making money on their bitcoin investments. Following that hearing, Coinbase published a blog post that more or less conceded defeat but took solace in the fact that the company had successfully forced the IRS to narrow its initial summons, which sought records from approximately 500,000 customers.

Despite the narrow focus of the final order, the successful defense of the summons will likely encourage the IRS to ramp up its efforts to bring bitcoin users into compliance with tax reporting obligations — particularly following the industry’s dramatic growth in 2017.

Featured Image from NPR/Dennis Brack/LandovIRS-v-Coinbase-order