Nov 8, 2018 17:10 UTC
Nov 14, 2018 at 19:31 UTC
US Student’s 5k Crypto investment Turns Into 400k Tax Bill, As Per US Law
A student whose identity remained anonymous, posted on Reddit about how he now faced a huge tax over his crypto trading earnings, which he had invested in the may of 2017. He then goes on to elaborate on how he had signed up at the cryptocurrency broker Coinbase and purchased a range of altcoins, which had gained value by 10 times. He had initially invested 5000 USD in Ethereum, which he claimed had been worth just over 800,000 USD. He also claims that he was on the verge of cashing out, once his portfolio reached one million USD mark when the bear market struck and his portfolio turned southwards. He wrote:
“I gambled in more than a few bad ICOs to start 2018, had some money in coins that absolutely plummeted with no chance of recovering, etc. Today my portfolio sits at $125k, a far cry from my $880k. My estimated tax liability for 2017 is about $400,000.”
The 2018 market hasn’t been the greatest for most investors, where the crypto market lost almost 70 percent of its entire capitalization and from 800 billion USD, it now stands at a little over 211 billion USD where, most coins lost over 90 percent of their value.
The US law states that crypto investors have to declare taxes, with the tax form 1099-K , which is not a promising situation for this poor student who also added on the post that
“My estimated tax liability for 2017 is about 400k (live in California) […] I’m a student and I work part time making $12/hr as a retail associate at Barnes & Noble. I haven’t paid any taxes or filed any returns for 2017. I wanted to but I have no idea where to begin.”
Coinbase, earlier this year clarified about that the 1099-K of the individual, which calculated the gains of all individuals all around the year and though the student had not withdrawn any funds to a ban account, all cryptocurrency-to-cryptocurrency trades had been listed on the report.
He claimed that he wasn’t aware of the taxation laws and had thus never bothered to set anything aside.