The prolonged bear market of 2018 saw Bitcoin’s price decline with about 75 percent through the year. Chances are that a lot of people sold at a loss. However, this accountant thinks that filing for a tax refund may be a bit tricky.
2018 – A Rough Year
2018 saw the entire market cap of all cryptocurrencies shrink to about $120 billion from over $800 billion at the beginning of the year. A lot of altcoins experienced steep declines of more than 95 percent.
Bitcoin – the market’s forerunner, lost about 75 percent of its value in 2018. At the time of writing this, Bitcoin (BTC) is trading at $3,435.95, which is a far cry from the cryptocurrency’s ATH value of over $20,000 at the beginning of last year.
Naturally, this may have caused a lot of people to have sold their cryptocurrencies at a loss, hence leaving the opportunity to file for a tax refund open. However, one accountant holds that this might be easier said than done.
Bitcoin Tax Refund: A Challenging Endeavour
The IRS requires individuals to pay taxes on capital gains and, respectively, they can also deduct their losses on the tax form.
This reduces the amount that taxpayers owe and increases their overall eligibility for a tax refund.
However, according to accounting specialist Jake Benson, this might be a bit tricky. That’s because figuring out the so-called cost basis – the price of the asset at the moment of purchase – could be a bit challenging.
According to the accountant, the IRS doesn’t require cryptocurrency brokers to provide their clients with the traditional 1099-B form.
The burden is left upon the fund or the individual that’s trading to track cost basis, and this is extremely challenging. […] Some customers track their cost basis, some rely on proceeds, and it’s a really challenging scenario.
Last year, Live Bitcoin News reported that Fundstrat holds that US citizens old an estimated $25 billion in cryptocurrency. What is more interestingly, though, the agency also said that this new form of money actually represented 20% of the capital gains in the US throughout 2017.
What do you think of calculating tax refunds on cryptocurrency taxes? Don’t hesitate to let us know in the comments below!