In brief
- Uphold, an “anything to anything” trading platform, announced a partnership with Winklevoss-backed crypto tax firm TaxBit.
- Users in the US will have access to a tax suite and a new IRS form integration to monitor and simplify their taxes related to crypto.
- TaxBit co-founder and CEO Austin Woordward says the IRS has more work to be done to add clarity.
Tax season is never easy, but historically it’s been especially difficult for those in the crypto industry. Now, cryptocurrency trading platform Uphold is partnering with crypto accounting firm TaxBit, backed by Cameron and Tyler Winklevoss, to try and ease this burden.
The companies announced Tuesday that US users on Uphold’s platform will have access to a “full tax center suite” that will allow them to integrate their accounts with relevant IRS tax forms and monitor taxable transactions “real-time.” TaxBit, which calls itself the “TurboTax for Crypto” and earlier this year raised $5 million in seed funding led by Winklevoss Capital, will provide the integrated suite and facilitate the use of the IRS 1099-B form.
The companies cited the “confusion and audits caused by 1099-K tax forms,” where the IRS sent out over 10,000 letters last year to people who could be penalized for tax evasion related to crypto investments. The IRS had demanded exchanges and taxpayers submit 1099-K tax forms, which are intended for digital payments, but caused confusion because the form only shows total gains and losses.
On the other hand, the 1099-B tax form, intended for “broker and barter exchange transactions,” tells a more complete story because it tracks individual transactions of capital assets that may or may not trigger taxable events.
TaxBit CEO and Co-Founder Austin Woodward told Decrypt that “without Form 1099-B, taxpayers are responsible for compiling all of their transaction data and reporting their taxable transactions on IRS Form 8949 all on their own.”
Unlike the 1099-K, the 8949 form details the sales and dispositions of different capital asset transactions. “Form 1099-B is in the exact same format as IRS Form 8949,” Woodward said. “This allows taxpayers to take the information on Form 1099-B and transpose it onto Form 8949.”
Woodward envisions a future where cryptocurrency tax reporting will be more accurate and “will start at the top, the same way it does in the equity world.” This means “exchanges, merchants, lending platforms, and other facilitators of cryptocurrency movement can do a lot to make it easier on their users to report their taxes, just how Uphold is doing with this announcement of 1099-B reporting and in-app tax center suites,” Woodward added.
Last week, Decrypt spoke with crypto-focused certified public accountants about what tax filers need to keep in mind ahead of the April 15th deadline. Tax filers will have to report any crypto transactions they made last year.
As for the recent confusion with IRS guidelines in regards to virtual currencies like Fornite’s V-Bucks, which the IRS initially lumped in with cryptocurrencies but then later clarified their differences, Woodward remains hopeful that the IRS is working on better understanding digital currencies. “I believe that there will be better, additional guidance in the future that clarifies various questions that remain unclear,” he said.