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Ernst & Young Launches Application to Help US Crypto Investors With Tax Filings

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Ernst & Young Launches Application to Help US Crypto Investors With Tax Filings

Ernst & Young (EY) has introduced a new application that helps U.S. cryptocurrency traders calculate and file their taxes with ease.

The EY Cryptoprep app, a Software as a Service (SaaS) web-based crypto tax engine, helps users calculate crypto-related gains and losses that have to be reported on Form 8949, a form used to report sales and exchanges of capital assets.

According to a June 18 statement from EY, one of the four largest accounting companies in the world, the engine offers step-by-step guidance through the crypto tax process. Users of the application, which supports major digital assets, can connect it to various exchanges to collect data about all their transactions.

EY Cryptoprep will then aggregate and reconcile the data before applying the relevant tax rules to produce an account of crypto capital gains or losses. Afterward, a completed Form 8949 for all applicable years is issued. The app also enables users to submit amended returns for past tax liabilities, not only the current year.

Ernst & Young vice-chairperson for tax services Marna Ricker claimed the firm is responding to increasing demand.

“Our clients increasingly hold and trade crypto assets, creating the need for an innovative solution to address the evolving complexity around filing crypto taxes. The EY Foundry, our internal corporate venturing unit, created EY Cryptoprep to modernize the crypto tax accounting process,” said Ricker.

This is not the first offering from EY targeting digital financial assets. The firm unveiled an auditing software for cryptocurrencies called EY Blockchain in April 2018. EY Crypto-Asset Accounting and Tax, a tool that facilitates accounting and tax calculations for crypto transactions, targeted at both institutional and retail investors, was launched last year.

“EY Cryptoprep expands our innovative portfolio of successful new digital businesses,” said Chirag Patel, Ernst & Young foundry leader, in the statement.

The Internal Revenue Service deadline for tax returns is July 15, 2020.

What do you think about the EY crypto tax calculation tool? Let us know in the comments section below.

The post Ernst & Young Launches Application to Help US Crypto Investors With Tax Filings appeared first on Bitcoin News.

IRS Tells Couple With $7 Million in Bitcoin to Liquidate Crypto Assets and Pay off Tax Debt

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IRS Tells Couple With $7 Million in Bitcoin to Liquidate Crypto Assets and Pay off Tax Debt

The Internal Revenue Service (IRS) has won a case in which it demanded that a Maryland couple liquidate their bitcoin to pay-off a $1.1 million tax debt.

Alexander and Laura Strashny proposed to the IRS to pay their 2017 tax liability, generated from non-crypto activities, in installments over a six-year period.

But after seeing the Strashny’s $7 million cryptocurrency fortune, the tax collector rejected the proposal, insisting that the couple sell a part of their bitcoin and immediately settle the debt in full.

The case was heard in a tax court in the state of Maryland on June 11. More taxes await the couple in the likely event it sells crypto to pay-off the debt. Bitcoin investors in the U.S. are taxed on profits generated from buying and selling of digital financial assets.

The ruling “shows how your cryptocurrency holdings could work against you in applying for an installment plan with the IRS and how – contrary to popular belief – regulators have oversight over your cryptocurrency portfolio,” said Shehan Chandrasekera, tax expert at Cointracker.

According to court papers, the Strashnys filed a 2017 tax return on time, but did not pay the $1.1 million tax charge, inclusive of penalties. In July 2018, the couple proposed to the IRS to pay-off their huge tax bill over six years.

To qualify for the installment plan, a taxpayer must also furnish the IRS with details about their source of income, personal assets, including cryptocurrency, as well as monthly expenses. So, the Strashnys filed a Collection Information Statement, also known as Form 433-A, for this purpose.

It is on this Form that the couple revealed its $7 million crypto cache. In addition to annual wages of $200,000, the Strashnys were also pocketing $19,000 each month from their digital assets investment. Now the IRS hit the family with a formal threat of seizure of wages and properties, as it waited for a response on the installment proposal The tax collector demanded full payment on time.

Eventually, the Strashnys requested a hearing. The tax court ruled that the couple was in a good financial position to pay off the $1.1 million tax debt by liquidating the crypto stash or borrowing U.S. dollars against the virtual currency.

“The outcome of this court case shows how cryptocurrency is not immune from regulatory oversight,” explained Chandrasekera.

“One might question why the cryptocurrency holdings were reported on Form 433-A in the first place. This IRS form is signed by the taxpayer under penalty and perjury. If the large holding of cryptocurrency were omitted from the form, this would have been a fraudulent filing and the consequences could have been much harsher,” he added.

What do you think about the IRS crypto liquidation tax demand? Let us know in the comments section below.

The post IRS Tells Couple With $7 Million in Bitcoin to Liquidate Crypto Assets and Pay off Tax Debt appeared first on Bitcoin News.

Loophole in U.S. Tax Law Could Allow Bitcoin Traders to Write off Unlimited Losses

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A loophole in the U.S. tax law could allow qualified bitcoin traders to write off unlimited losses from their trading activities, according to an expert from crypto tax platform Coin Tracker.

Traders, defined by U.S tax collection agency Internal Revenue Service (IRS) as people who trade substantially, regularly and continuously, are allowed a maximum capital loss deduction of $3,000 per year. Excess losses are indefinitely carried into future years.

However, Coin Tracker head of tax strategy Shehan Chandrasekera demonstrates in a recent Forbes column that cryptocurrency traders can use a tax election called the “475(f) election” to go beyond the default limit in any single year.

“The good news is that the 475(f) election allows traders to deduct crypto trading losses without being subject to the $3,000 annual limit,” Chandrasekera notes. By activating the election, traders can also write off unrealized losses at the end of the year “leading to potential tax savings”, the accountant adds.

Individuals who want to benefit from this specific tax dispensation should apply to the IRS within 75 days from the start of the year they intend to operate as such. Traders currently pay taxes on profits generated from buying and selling BTC.

The disadvantage is that those who qualify for the election are subject to “a higher ordinary income tax rate compared to the long term capital gain tax rates that casual investors pay.” Traders are also required to pay the higher tax rate for any unrealized gains at year end.

Chandrasekera warns that the applicability of 475(f) tax election to cryptocurrency is not straightforward as it is only applicable when one deals with “securities” and “commodities.” IRS defines cryptocurrencies as “property”, leaving the applicability of the election for bitcoin traders unclear.

“With that said, bitcoin and some crypto derivatives are treated as “commodities” by the Commodity Futures Trading Commission (CFTC) so 475(f) election for those instruments is much clearer than other instruments,” Chandrasekera explains.

Clarity on the definition is pending. The American Institute of Certified Professional Accountants advocates that IRS make the election applicable to crypto traders and relevant parties.

What do you think about the 475(f) tax election? Let us know in the comments section below.

The post Loophole in U.S. Tax Law Could Allow Bitcoin Traders to Write off Unlimited Losses appeared first on Bitcoin News.

66% of Coinbase Users Willing to Leave the Exchange Due to Mounting Privacy Concerns

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66% of Coinbase Users Willing to Leave the Exchange Due to Mounting Privacy Concerns

Two-thirds of people who use Coinbase are willing to leave the platform following reports that the U.S. exchange plans to sell user data to two government agencies for $250,000.

Cryptocurrency trader and analyst John Rager carried out a poll on Twitter, asking his 73,000 followers: “Would you actually delete or stop using your Coinbase account?”

Over 5,000 people responded, and 66% said they would opt out of the regulated exchange, one of the world’s biggest. The remaining 33% expressed a willingness to stay. The platform holds thousands of personal user information drawn from stringent know-your-customer requirements, in compliance with US policies.

Coinbase is in the eye of a storm after reports emerged at the weekend alleging that the crypto exchange is selling a blockchain tool that provides law enforcement agencies with superior analytical capabilities.

The Drug Enforcement Agency (DEA) and the Internal Revenue Service (IRS) intend to buy licenses from the exchange’s analytics unit called Coinbase Analytics, according to documents that are available for public review.

In one of the documents published in April, the IRS points out the relationship between Coinbase Analytics and Neutrino, a blockchain surveillance platform controversially acquired by Coinbase in 2019. It says the subsidiary “allows for the analysis and tracking of cryptocurrency flows across multiple blockchains that criminals are currently using.”

The IRS added: “Coinbase Analytics also provides some enhanced law enforcement sensitive capabilities that are not currently found in other tools on the market. This action will result in a Firm Fix Priced purchase order, Period of Performance: One base year from date of award with one 12-month option.”

On the other hand, the DEA document observes that Coinbase Analytics (CA) “provides investigators with identity attribution and de-anonymities virtual currency addresses domestically and internationally.”

It said that “CA is known for its accuracy of attribution, which includes some of the most conservative heuristics used in commercial blockchain tracing tools. This is critical in avoiding false-positive during target identification.”

Coinbase denies it is selling personal user data. A company official argued that “all data in our analytics tool is fully sourced from publicly available data, and does not include any personally identifiable information.”

But frequent outages during periods of bitcoin’s hyperactivity, high transaction fees, and other privacy concerns have set thousands of Coinbase users on edge. The exchange has also previously shared data of 14,000 clients who traded $20,000 worth of crypto or more with the IRS, to the chagrin of investors. Privacy is a key tenet of the Bitcoin movement, almost untouchable.

In the John Rager poll, some investors showed they have become disillusioned with the Coinbase ‘dream’.

“Honestly, I don’t think there is a good reason to use it anymore, outside of name recognition. There are many better platforms for onboarding. And better options for trading,” opined @_realPaulRyan.

One @Flat railed: “I’m in the 66% and stopped (using Coinbase) 3 years ago. Fees are an absolute ripoff. Always down when price moves. Absolute joke. Why on earth anyone would use them is beyond me.”

Separately, Rager suggested that “millions of dollars seem to be leaving Coinbase as we speak. Investors & traders are no longer limited to Coinbase or Bitmex. If you screw over customers, take part in shady deals, or don’t improve a product, customers can now go elsewhere to trade/invest.”

What do you think about Coinbase’s deals with the IRS and DEA? Let us know in the comments section below.

The post 66% of Coinbase Users Willing to Leave the Exchange Due to Mounting Privacy Concerns appeared first on Bitcoin News.

Japanese Finance Minister Shoots Down Plan to Cut Bitcoin Tax to 20%, Cites Crypto-Divide

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Japanese Finance Minister Shoots Down Plan to Cut Bitcoin Tax to 20%, Cites Crypto-Divide

Japan’s finance minister Taro Aso says he is opposed to reducing tax on bitcoin income to 20%, on par with stock dividends, arguing that most Japanese households find it difficult to invest in digital assets.

The development suggests that Japan will uphold its current definition of cryptocurrency as miscellaneous income, whereby virtual currency is taxed at rates of up to 55%.

Players in the crypto sector have been pushing for new legislation that would categorize cryptocurrency as stocks for similar tax treatment.

Responding to a question from Japan Restoration Association (JRA) member, Shun Otokita, at a recent meeting of the House of Councillors Committee on Financial Affairs, the finance minister said it would be difficult to persuade Japanese people to convert their cash savings to digital assets.

“Out of 1,900 trillion yen ($17.6 billion) financial assets held by households in Japan, around 900 trillion yen ($8.4 billion) is now being held as cash deposits and that is abnormal,” Aso said.

The minister also addressed the legal definition of digital currency. In terms of the Payment Services Act, introduced in May, “crypto-asset” has replaced all references in law to “virtual currency.”

Aso suggested another revision that would replace “crypto-asset” with “angō shisan,” the Japanese word for “stablecoin.” “The word ‘crypto’ sounds a bit shady so why don’t we use the Japanese word for stablecoin… Sounds more stable right?” he proposed.

The Payment Services Act also cut the leverage limit for cryptocurrency margin trading from 4x to 2x. JRA member Otokita questioned Japan’s Financial Services Agency (FSA) on lowering of the cap.

The agency said it arrived at the revision after consulting with experts and noting that such a cut was an appropriate response to the volatility of cryptocurrencies.

Worldwide, governments are looking to earn more from bitcoin by way of taxation, contrary to their previous attitudes, which targeted a complete ban on cryptocurrency usage.

What do you think about Japanese Finance Minister’s position on crypto tax? Let us know in the comments section below.

The post Japanese Finance Minister Shoots Down Plan to Cut Bitcoin Tax to 20%, Cites Crypto-Divide appeared first on Bitcoin News.