Blox, an industry leading crypto accounting platform, and global tax software leader Sovos have released the “2020 Crypto Tax Report,” which identifies emerging challenges for today’s cryptocurrency tax and accounting professionals. The report finds major gaps in reporting data and a lack of client understanding around crypto tax law, with more than 50% of CPAs surveyed believing most of their crypto clients likely owe back taxes.
The Blox and Sovos Crypto Tax Report surveyed U.S.-based CPAs who provide cryptocurrency accounting and taxation services to businesses and individuals that interact with digital assets. The report comes during the first tax year in which the IRS added language about digital assets to the standard 1040 filing form, which asks taxpayers whether they held “any financial interest in any virtual currency” in 2019.
“It’s clear from this report that crypto investors are still alarmingly unaware of how to handle their reporting and tax liabilities,” said Paul Banker, general manager of Tax and Regulatory Reporting at Sovos. “While tax regulations continue to take shape, crypto exchanges should be providing 1099s to their clients now to help them understand taxable crypto events and avoid improper or under reporting of their income to the IRS and applicable states.”
Top challenges for crypto accounting and tax professionals
The report findings indicate the main pain point for CPAs – missing data – is not necessarily within crypto investors’ control. In fact, less than 50% of crypto tax clients have access to their full crypto transaction data. Notably, while some crypto exchanges have tried to make it easier for users to obtain these records, others have not automated reporting or regulatory content management, and it is still difficult for many investors to retrieve personal crypto records.
“When it comes to crypto tax, sourcing accurate and complete transaction data can be almost as difficult as understanding the unclear regulatory requirements. That’s why automated tools and software are essential, so businesses and individuals can eliminate the occupational challenges of manual reporting,” said Alone Muroch, CEO of Blox.
When asked how many of their clients understand taxable crypto events, most of the CPAs surveyed believed only 16% completely understand.
Crypto professionals are now under more pressure to understand how to handle cryptocurrency and digital asset accounting and tax for their clients. This is especially challenging considering missing data from clients was found to be the biggest pain point for crypto tax experts — 90% of CPAs who participated in the report identified missing data as one of their biggest challenges. This concern surpassed manual calculation and cost basis (67%), and government regulation (55%).
About the report:
The report collected data from 33% of known, U.S.-based, verified CPAs that operate in a variety of capacities with cryptocurrency accounting, taxation and compliance. Participants ranged from firm-employed professionals to small-business owners, founders of educational foundations and some that focus exclusively on taxation. The report was a collaboration between Blox and Sovos, and is backed by the Accounting Blockchain Coalition, one of the most prominent associations for cryptocurrency and blockchain accounting and tax.
You can download the Blox and Sovos “2020 Crypto Tax Report” today.
The industry-leading platform, Blox, was established in 2017 by CEO, Alon Muroch and Adam Efrima. Blox was also responsible for the 2019 Crypto Accounting Insights Report. The company provides crypto tracking, management and accounting solutions for professionals businesses and enterprises. Customers of the platform include industry giants such as eToro, Crypto.com, Polkadot, and top crypto funds, accounting firms and more. Blox’s API technology is helping to empower businesses and professionals with the best productivity tools to manage all their crypto transactions, portfolios and assets. The SaaS platform is the largest toolbox of smart and intuitive features needed for the crypto company of the future. Accurate, automated and secure – Blox is a platform you can count on. Start for free today by visiting Blox.io.
Sovos is a leading global provider of software that safeguards businesses from the burden and risk of modern tax. As governments and businesses go digital, businesses face increased risks, costs and complexity. The Sovos Intelligent Compliance Cloud combines world-class regulatory analysis with its secure, scalable and reliable S1 cloud software platform to create a global solution for tax determination, e-invoicing compliance and tax reporting. Sovos supports more than 7,000 customers, including half of the Fortune 500, and integrates with a wide variety of business applications. The company has offices throughout North America, Latin America and Europe. Sovos is owned by London-based Hg. For more information visit https://www.sovos.com and follow us on LinkedIn and Twitter.