The student grew $5,000 to $880,000
He supposedly began investing in cryptocurrencies in May of 2017. This came after the student – who has decided to remain anonymous – heard that a friend to him was about to invest heavily in Ethereum.
”I said hell with it, signed up on Coinbase and threw $5000 into crypto. Mind you this is like half of my life savings, but in the grand scheme of things it’s not too much to lose,” the college student states in his Reddit post.
He notes that he subsequently ”struck gold a few times,” complete with ”hitting 10x’s on multiple alt coins”. In December of 2017, the anonymous student was sitting on a portfolio of cryptocurrency assets worth $880,000.
The author of the post points out that he has in hindsight regretted not realizing his gains.
”Now I should have listened. I should have cashed out, yes. Once I hit $1 million was going to… I would have been set. And then, JUST like that the market tanks going into the new year,” he writes.
Didn’t know about cryptocurrency taxes
Although the ensuing market downturn would be significant on its own, the author notes also making poor investment choices. ”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.”
Moreover, although the student’s current cryptocurrency portfolio is valued at around $125,000, he faces a tax liability of $400,000. This is due to his taxes being calculated at the end of the 2017 calendar year. His losses, however, have occurred during 2018.
He also mentions not having paid any taxes or filed any tax returns for 2017 yet. Neither did the student prepare any sort of financial buffer before the market downturn.
”I didn’t know anything about taxes so I never bothered to set aside anything. They really never do teach this stuff,” he recounts in the Reddit post.
Furthermore, the student is working part-time as a Barnes & Noble retail associate, making $12 per hour. He also shared a link to the 1099-K reported by Coinbase this spring, asking for advice on his situation.
The student also argued that all of his activity was crypto-to-crypto trades. Moreover, he didn’t ”ever cash out to fiat and transfer any USD into my bank accounts from these tradings.”
Several responding to the Reddit post have urged the student to consult with a Certified Public Accountant. Nevertheless, they also note that the results of this tax battle will likely ”not be a high point in [the college student’s] life.”
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Read more at: Tax Times blog