Doing taxes isn’t a pleasant thing to do, especially after the new law which made reporting crypto trade obligatory. The process of filing requires a lot of time and is often confusing to the investors, which explains why many investors fail to report any crypto profits.
The early data is already in, and it’s not looking good for government tax collectors. Internal Revenue Service states that among the last 250,000 tax filers there were only about 100 people who reported crypto capital gains. The number is extremely low by all possible estimations. The similar outcome happened in 2015, when only 802 people officially admitted their crypto investments, although a great number of people didn’t even know the cryptos existed in 2015. The discrepancy between the numbers demonstrates that most investors prefer to hide their crypto profits. Of course, such practices are illegal and dangerous, as they could entail fines or even a prison sentence.
Elizabeth Crouse, K&L Gates partner suggested that crypto investors have “pretty high risk tolerance”, which explains their bold behavior. Other experts offer a different explanation: many investors simply don’t know about the new filing requirements. Selva Ozelli, a crypto expert and lawyer, said:
“U.S. taxpayers may not even be aware of this requirement when it’s obvious that even experienced practitioners aren’t 100% certain whether there is a requirement of the kind or not.”
Also, it can’t be ruled out that the investors are waiting until the last minute to file their crypto capital gains.