Blox & Sovos Discover Deep Challenges for Cryptocurrency Tax Reporting and Compliance

March 31, 2020

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.

About Blox

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.

About Sovos

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 AmericaLatin 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.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Additional Press Releases

August 20, 2020
Sovos to Gain New Investment by Hg Saturn and TA Associates, Fueling Continued Growth as Digital Transformation of Tax Accelerates Worldwide

BOSTON – August 20, 2020 – Global tax software provider Sovos today announced that Hg — a leading global software investor, partner and supporter of the expansion of Sovos for more than four years — will lead a further, majority investment in the company through the Hg Saturn 2 Fund. TA Associates, a leading global […]

Read More
July 27, 2020
Sovos Names Terry Melnik General Manager of Sales and Use Tax Line of Business

Global tax software provider Sovos today announced that Terry Melnik, formerly general manager at Oracle Netsuite’s OpenAir, has joined the company as GM of Sales and Use Tax. With 20 years’ experience in technology, management consulting and ecommerce, Melnik is charged with leading Sovos’ long-range plan in a market undergoing rapid change driven by the digital transformation […]

Read More
July 23, 2020
Sovos Buys Keane’s Unclaimed Property Consulting Services and Software

Global tax software provider Sovos today announced it has acquired Keane’s unclaimed property consulting services and reporting technology. The acquisition, Sovos’ fourth this year, makes 2020 the company’s most acquisitive year yet. The purchase of Keane’s software and consulting services deepens Sovos’ footprint in the unclaimed property compliance market, as states turn to these revenue streams to […]

Read More
July 13, 2020
Cryptocurrency Exchange Platform Binance.US Selects Sovos for Tax Information Reporting

Global tax software leader Sovos today announced that cryptocurrency exchange platform Binance.US has selected Sovos for its 1099 crypto tax information reporting needs. The Sovos Tax Information Reporting solution will automate Binance.US’ 1099 forms and filings for crypto investors, reducing the potential for error and delivering automatic regulatory updates as the cryptocurrency compliance landscape continues to evolve. Founded in […]

Read More
July 7, 2020
Sovos Acquires U.K.-Based VAT Managed Services Company Accordance

Global tax software provider Sovos today announced it has acquired Accordance, a U.K.-based value-added tax (VAT) managed services company. Accordance has been a Sovos partner since 2018 and has implemented Sovos VAT Reporting software to provide technology-enabled compliance services to its clients. The acquisition comes at a critical moment for VAT countries, where businesses face a range […]

Read More