Bitcoin regulation is an ever-evolving topic, especially in the United States where national legislation is impacted by individual states.
The student invested in multiple coins and, through crypto to crypto trading, was able to raise his initial investment all the way to $880 thousand USD in December of 2017. However, as is its volatile nature, the crypto market crashed in the new year. Many of the coins that the student had invested in plummeted with no chance of a resurgence. According to this recent post, the student’s portfolio now currently sits at around $125 thousand USD.
The real problem, however, is that the student only incurred these losses after the new year. This means that he is still liable to be taxed for the amount he earned in 2017. This tax comes to a whopping $400 thousand USD. A link was provided in the post which leads to the students 1099-K form, or payment card. This is a record of all the payment transactions an American citizen makes in a year.
The student has no way to pay this off. According to the post, they are only earning $12 USD an hour working part-time. The student admits they neglected to allocate money for taxes because “they really never do teach this stuff.”
Responses to the plea were grim. One person claiming to be a certified public accountant (CPA) spoke about the fact that the longer the student leaves the tax untouched, the higher the interest on it will become. They heavily recommended that the student “get a tax professional and stop wasting time trying to get free advice.”
This dire situation is indicative of the need for better global recognition and updated tax laws about cryptocurrency This college student may have possibly avoided these circumstances if they were actually taught about cryptocurrency and how to handle tax in school.
Some countries are thankfully taking steps to provide students with a knowledge of crypto. The University of Malta is discussing the provision of courses designed to allow students and state regulators a better understanding of cryptocurrency and blockchain technology.
It is a terrible situation this college student has found themselves in. If it is not handled correctly now, rising interest rates and penalties may very possibly ruin their life.
Steps are indeed being taken. An update to the post, on the 2nd of November, clarifies that the student has scheduled a consultation with a tax attorney who specializes in cryptocurrency.
Hopefully, the student can navigate their way out of this swamp.