Due to the decimation that was caused by the Coronavirus pandemic, Congress passed the CARES Act in an effort to provide direct stimulus payments to Americans. It was announced in April 2020 that the first payment would be issued, and each qualifying taxpayer would receive $1,200.
Investing stimulus money in crypto
Instead of spending it on needs like food and rent, most Americans invested it. Many cryptocurrencies saw their prices skyrocket during the pandemic and following recovery. This is what you would have earned if you had bought crypto with your stimulus payment in April 2020, despite your financial advisor’s recommendations.
According to Yahoo! Finance, If you had made the decision to make a crypto investment in April 2020, Bitcoin would have likely been your first choice since it is the original and best-known cryptocurrency. Bitcoin was trading at around $6,623 at that time, which means you made a return of 598% in just under 20 months, which is pretty remarkable when compared with the return of about 66% over that same time period for the S&P 500.
The most you could have made on your $1,200 investment would have been $11,292, meaning you would have made a return so close to 950% if you were able to pull out at Bitcoin’s all-time high of $68,990.90.
Receiving tax refund on crypto
The start of the new year signifies the beginning of tax season, and all across the USA, tax returns are being filed for the 2021 calendar year. The IRS is granting tax refunds in cryptocurrency for people who are owed money and who expect to receive their refunds soon.
According to Marca, those who wish to receive their tax refund in cryptocurrencies should complete their tax return through the Coinbase part of the TurboTax website in order to begin the conversion process. An anticipated three-week wait period will then elapse before the return is received.
TurboTax will now request account information once the tax refund calculation has been completed, and assuming there is a tax refund due, a direct deposit account can be set up by choosing the Coinbase option before the users enter their Coinbase account and routing number.
Many converted their stimulus payments to crypto in 2020 and 2021. With this collaboration between TurboTax and Coinbase, it is expected that many taxpayers would do the same with their tax refunds in 2022, though anyone considering this should approach with caution and understand the risks associated with crypto.