U.S. Households Could Owe $25 Billion in Unpaid Crypto Taxes
In the last few months, there has been a significant increase in the attention being paid by tax agencies around the world to the cryptocurrency market. In 2017, the price of bitcoin and many other crypto species rose tremendously leading to renewed interest in the market and the potential tax implications. Similarly, in the United States, the IRS has been ramping up its efforts to make sure that crypto traders do not neglect their tax obligations.
$25 Billion Unpaid Crypto Taxes
With the climax of the tax season in the United States fast approaching, a Wall Street analyst has estimated that U.S. households owe about $25 billion in crypto-based taxes.
Tom Lee, a former strategist at J.P. Morgan Chase and the current research head at Fundstrat made the assertion known in a report released on April 5, 2018. Lee based his estimation on the established historical tendency of U.S. households to earn an average of 52 percent capital gains per annum.
Lee then went on to reveal the U.S. investors earned a total of $1.04 trillion in capital gains for both crypto and stocks in the year 2017.
Massive Selloffs instead of Tax Filing Deadline
Lee believes that as there is just a little over a week until the tax-filing deadline of April 17, the crypto market will experience a massive selloff.
According to the Fundstrat chief, crypto exchanges subject to income tax in the United States are also under an enormous amount of pressure to convert their crypto holdings into USD to oblige their tax commitments. These exchanges usually have net incomes that are more than $1 billion, but their operational capital is traditionally held in bitcoin and ether.
This massive sell-off predicted by Lee does little to help the cause of crypto prices. In fact, sales due to the pressure of the impending tax-filing deadline will only add to the woes of bitcoin as far as 2018 is concerned.
Bitcoin has seen its value decline by more than 50 percent since almost hitting the $20,000 mark in mid-December 2017. Fears over stricter regulatory climate caused panic and induced a massive sell-off at the beginning of the year.
The price of bitcoin and indeed the crypto market, in general, has struggled to recover.
Bitcoin to Soar After “Tax Day”
Despite the decline that will be caused by the dump leading up to tax day, Lee believes that bitcoin will begin to recover after April 17. He still maintains his earlier prediction that bitcoin will reach the $20,000 mark by the middle of the year and even close the year somewhere in the $25,000 region.
Lee also predicts that the price of ether will recover and break the $1,000 milestone, staying steady at $1,500 by the middle of the year. He expects that the price of ether will be pushing close to $2,000 by the time 2018 draws to a close.