How to Ruin Life Trading Cryptos: College Student Turned $5k Investment into $400k Tax Bill

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In May 2017, the college student invested $5,000 in Ethereum (ETH), when the digital asset was worth around $50. However, what then may seemed like a terrific job done, now seems to be – a not so good of an idea. While this $5k investment eventually turned into $880k in December 2017, gambling and the high volatility in the industry reduced the investment portfolio to $125k and left the student with task worth $400k.

The student, whose identity remained anonymous, posted his predicament on Reddit on the name “u/throwaway283921.” Seeking advice from readers, the student said that he has been slammed with huge tax over his cryptocurrency trading earnings from 2017.

In his story he is telling about how he began his trading back in May 2017, whereby he signed up at popular cryptocurrency broker Coinbase. He then purchased a range of alt-coins, which he states increased in value by more than 10 times. By the end of December 2017, at a time when the cryptocurrency industry experienced a significant injection of capital that resulted in Bitcoin reaching its all-time high of $20,000, the student claims that his portfolio was worth just over $800,000.

He also claims that he was close to cashing out when the portfolio breached the $1 million mark, however once again he proceeded to let his investments ride. When the 2018 bear market begun – which saw some cryptocurrencies lose up to 90% from their all-time high, the trader’s portfolio quickly 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.”

Unfortunately, 2018 hasn’t been nearly as good for most investors. The cryptocurrency market lost more than 70 percent of its entire capitalization. From $800 billion in January, it’s currently sitting at a little over $211 billion. A lot of the coins issued through initial coin offerings have either tanked or lost over 90 percent of their value.

The situation therefore isn’t really promising for the poor guy since by the US law, cryptocurrency investors are required to declare taxes using the tax form 1099-K and major cryptocurrency exchanges like Coinbase have tax filing systems in place to automate the process for its investors.

In early 2018, Coinbase reported the 1099-K of the individual, which calculated all of the gains the individual made throughout the calendar year. While the student did not withdraw any funds to a bank account during that time, cryptocurrency-to-cryptocurrency trades were listed on the report.

U.S. in particular are very clear on their stance and that being viewing the cryptocurrency assets in the same manner as property, which includes the likes of stocks, shares, Gold and real estate.

He claimed that he didn’t know anything about taxes so he never bothered to set aside anything.

He added:

“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.”

Tax System Pitfalls

Understanding the way the tax system works and staying compliant is absolutely essential for every investor. According to a research from Fundstrat Global Advisors, the IRS can expect up to $25 billion in Bitcoin capital gains taxes for fiscal 2017. American crypto holdres are struggling to file capital gains taxes, as has been the case for several years now. An interesting report by Fundstrat shows US citizens owe the IRS an estimated $25bn in cryptocurrency. Additionally, this new form of money represents 20% of 2017 US capital gains.

After the price of Ethereum was above $10 for most of the 2016, in March 2017, ETH’s price set an ATH of $50. In June 2017, search interest exploded and ETH’s price hit $400. In January 2018, search interest surged once again, and at the peak of the bull market, ETH hit $1,400.

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Disclaimer: This press release is for informational purposes only, the information does not constitute investment advice or an offer to invest. The opinions expressed in this article are those of the author and do not necessarily represent the views of CriptomonedaseICO , and should not be attributed to, CriptomonedaseICO .

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