CoinLedger’s Annual Crypto Tax Report Reveals 58% of Investors Now Report Crypto Transactions
CoinLedger released its Annual Crypto Tax Report, which claims that the average profit for crypto investors amounted to $887 in 2023.
Cryptocurrency software platform CoinLedger released its Annual Crypto Tax Report, offering insights into the changes in cryptocurrency tax reporting over the past year. The report stems from a survey conducted with global public opinion and data company YouGov, featuring responses from 305 American adults engaged in cryptocurrency ownership or investment between December 2nd and December 8th, 2022.
Among the key findings, CoinLedger highlighted a positive trend, noting that 58% of cryptocurrency investors now include their transactions in their tax filings. This marks a 4% increase from 2022, indicating a gradual improvement in compliance with cryptocurrency tax reporting regulations.
However, the report suggests that some cryptocurrency investors still overlook their tax obligations. According to the survey, 31% of investors do not report cryptocurrency transactions on their taxes, with 11% choosing not to respond. This represents an increase from the 2022 annual report, where 28% admitted not reporting crypto on their taxes, and 17% declined to answer.
The predominant reason cited by investors for not reporting cryptocurrency on their taxes was ‘I haven’t made a profit on cryptocurrency,’ accounting for 50% of respondents. Notably, the next frequently chosen option, selected by 18% of respondents, was ‘I did not know I had to report cryptocurrency on my taxes,’ highlighting a common misconception among investors regarding tax obligations in the absence of profits.
Crypto Investors’ Understanding of Taxable Events
CoinLedger identified a significant lack of clarity among cryptocurrency investors concerning the taxable nature of their transactions.
The survey revealed that while 65% of investors correctly identified selling cryptocurrency as a taxable event, only 38% accurately recognized a crypto-to-crypto trade as such. Additionally, 25% believed incorrectly that transferring cryptocurrency between wallets incurred taxes, and 21% thought that holding cryptocurrency itself was a taxable event.
As a result, the company’s analysis suggests that crypto investors may be mistakenly reporting non-taxable events to the Internal Revenue Service (IRS), emphasizing the need for enhanced educational efforts to help investors accurately report their taxes.
Crypto Investors Seek More Information from Exchanges
Another significant discovery from the survey indicates that 68% of investors seek more information regarding taxation from their cryptocurrency exchanges. Unlike traditional brokers such as Robinhood and E*Trade, most cryptocurrency exchanges do not provide users with tax forms detailing capital gains and losses.
CoinLedger suggests that the lack of accurate tax forms from exchanges like Coinbase and Gemini may contribute to the feeling of being unprepared for the tax season among numerous investors.
The company emphasizes that despite the postponement of mandatory cryptocurrency tax reporting for major United States cryptocurrency brokers, the issuance of 1099 forms is unlikely to resolve tax reporting challenges due to the unique characteristics of cryptocurrency.
CoinLedger anticipates that as the cryptocurrency ecosystem matures, there will be a natural increase in crypto tax reporting rates. However, the report underscores the persistent challenges, indicating that a substantial portion of investors still refrain from reporting their cryptocurrency holdings, and even among those who comply, many lack an understanding of the tax implications associated with their transactions.
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