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Crypto Traders Spiked 149% in 2019 to 2.3 Million at Beginning of the Pandemic, IRS Report

By Ben Steverman

Roughly 2.3 million US taxpayers told the Internal Revenue Service they traded cryptocurrencies in 2020, data from the agency show. 

That’s a 149% increase from 2019, when nearly 928,000 taxpayers answered “yes” to a question of whether they had received, sold, sent or otherwise acquired virtual currency. 

A bitcoin, center, and other cryptocurrency logo signs outside a cryptocurrency exchange kiosk in Istanbul, Turkey, on Tuesday, April 26, 2022. Both tech stocks and Bitcoin have notched big swings this year as the Federal Reserve becomes less accommodative as part of its fight to combat inflation. Photographer: Erhan Demirtas/Bloomberg

The figures underscore crypto’s growing popularity before this year’s painful market rout, and the extent to which Americans may be exposed to losses as platforms collapse. Still, part of the bump may also reflect the IRS’s efforts to ensure that filers disclose holdings and pay taxes on any gains.

A Federal Reserve study from late 2021 and released in May found 12% of American adults “held or used cryptocurrencies in the prior year,” though the authors warned that the survey of US households was conducted online and thus may be an overestimate.

The IRS report on individual tax return data also showed Americans’ unemployment compensation jumped to $405 billion in 2020, from $21.4 billion in 2019. 

Despite the economic fallout from the pandemic, government relief payments and a rise in investors’ capital gains helped total US individual income climb 5.2% to $12.7 trillion. Wages and salaries increased more slowly, by 1.7% to $8.4 trillion.

The average federal income tax rate in 2020 was 12.6%, up from 12.3% in 2019. Americans earning from $2 million to $10 million paid the highest average rate: 28%. The richest taxpayers, earning $10 million or more, paid less, at 25.5%, because their income was more likely in the form of long-term capital gains, which are subject to lower rates. 

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