Paxos, a regulated Trust company, turned to Sovos to improve the tax reporting process for its crypto-asset exchange, itBit. itBit is a leading exchange that provides institutional-grade cryptocurrency trading solutions with exceptional customer service. As itBit’s popularity and usage increased over time, itBit needed support handling the explosive growth in reporting tax forms for users and the IRS.
itBit user growth led to an untenable increase in tax reporting needs.
Reporting required seven people working for nearly a month to process customer forms.
Sovos offered real-time ID verification and printing services.
itBit became the first regulated crypto-asset trading platform in the United States in 2015. It offers trading and custody services for a range of cryptocurrencies, including Bitcoin, Ethereum, Litecoin and Stellar Lumens. itBit offers traders access to a global exchange, OTC trading desk, custody services and escrow services. The platform further differentiates itself in a crowded field by providing a premium trading experience, personalized customer support and best-in-class security.
As investment in cryptocurrencies boomed and the company needed to report a rapidly increasing number of forms to the IRS, Paxos found its reporting needs becoming more demanding. Previously, processing customer forms could take a few people several weeks to complete, but this was not scalable. Although the vast majority of crypto trading platforms do not send 1099 forms, Paxos is a company that takes customer service and compliance seriously, and therefore needed to find an efficient solution for tax reporting that would ensure it could stay ahead.
To overcome the challenges it faced, Paxos needed to execute reporting for form 1099-B, which financial institutions use to report transactions such as stock or mutual fund trades to the IRS. Although IRS regulations on crypto reporting are still evolving, the agency has indicated that existing tax reporting rules related to property should be followed, which typically would lead to reporting using form 1099-B. Paxos is using real-time ID verification from Sovos to confirm investors’ identities as they onboard with itBit, as well as e-statement and printing services.
“We always strive to create an exceptional trading experience that both protects and benefits our customers. Sovos takes away the complicated guesswork of crypto tax reporting, helping us and our clients to be compliant.”
Andrew Chang
Chief Operating Officer, Paxos
In Sovos, Paxos found a partner that offered the expertise and track record of more than three decades of tax reporting with many of the world’s largest financial institutions. In addition to this success in traditional industries, Sovos also demonstrated a deep understanding of the crypto space and the unique challenges it presents.
As investors report crypto transactions to the IRS, Paxos can provide them with guidance. By powering tax reporting for Paxos, Sovos cut the time required to process customer tax forms from weeks to mere minutes. By providing such an efficient solution, Sovos is helping both Paxos and its itBit users to be in compliance with the IRS.