Many cryptocurrency investors filed tax returns on mind-boggling gains this spring—some in the range of 20 to 30 times their original outlay. But now it’s time to settle up with the IRS, and there’s a problem: The money isn’t there anymore.
cryptocurrency investors
“This is the biggest issue in crypto right now,” said Clinton Donnelly, the founder of CryptoTax Audit. “We have several clients who have just gotten wiped out, and they’re just terrified.” “They have never thought about estimated taxes and saving as you go,” he said. “They thought there would always be enough at the end of the year to pay for whatever taxes they had.”
Crypto investors also tend to be younger and less knowledgeable about finances than typical stock market investors, Gordon said. And the rise of investing apps like Robinhood have made trading feel more like a game, and less like a serious financial decision with long-term consequences. People who can’t afford their tax bill generally have two options: They can “settle” with the IRS for a sum that the agency determines they should be able to pay, or they can enter into a payment plan under which they pay down a percentage of their tax bill every year. Gordon says he has clients who are still paying off their tax bills from a 2018 crypto market crash.
"It's a very serious thing,” he said. “You go from the exhilaration of, ‘Oh wow, I’m worth a million,’ to all of a sudden, ‘I'm wiped out and I have to enter into fraud and hide from the IRS.’"
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