Cryptocurrency taxation software startup TaxBit announced investment from outside Coinbase ventures, PayPal Ventures and Winklevoss Capital.
The firm provides a platform for automated tax reporting for both cryptocurrency users and companies.
Due to its legal status of ownership in the United States, every time a person spends or trades cryptocurrency, they can potentially initiate taxation. The potential confusion is exacerbated by cryptocurrency-specific revenue-generating concepts such as staking, Mining and distributions.
TaxBit Receives Major Venture Support
Since this is a dynamic and constantly changing industry, it can be difficult for cryptocurrency users to know exactly what their tax liabilities are. Combined with the somewhat shadowy nature of various aspects of the industry, this has previously led to widespread underreporting of cryptocurrency activity by tax authorities.
TaxBit hopes to ease the headache of paying cryptocurrency tax. The startup, based in Salt Lake City, Utah, provides automatic taxation software for both regular cryptocurrency users and companies. Existing clients include BlockFi and Gemini.
TaxBit has raised venture capital funding from Coinbase Ventures and PayPal Ventures, according to a press release released Thursday. The firm also received additional investment from previous sponsors, Winklevoss Capital. The amount invested is currently unknown.
TaxBit CEO and Founder Austin Woodward commented on the recent funding:
“This investment will help us achieve our goal of becoming the most innovative and trusted provider of crypto taxation technology.”
Efficient automation of digital currency taxation is likely to become popular
In XNUMX/XNUMX, extremely volatile markets, some traders make numerous purchases and sales in cryptocurrency markets every day. Every time a trader buys or sells one cryptocurrency for another, he can trigger a taxable event.
As crypto trader Scott Melker mentioned earlier this month, an accurate record of such activity over the course of a year is serious business:
My accountant hates me today.
- The Wolf Of All Streets (@scottmelker) January 5, 2021
However, it's not just high volume traders who need to worry about accurate tax reporting. As reported last August, the IRS wants to be aware of any cryptocurrency activity during a certain reporting period.
It is even more confusing that the various cryptocurrencies and their protocols allow for passive income through betting and other incentive structures. Then there is the problem of cryptocurrency hard forks, which, again, can bring taxable income to the holder of this digital asset.
Regulation is often slow and certainly lags far behind the ever-evolving crypto industry. This makes tax reporting even more challenging for a digital currency user who wants to comply.
With the investment in TaxBit, big names like Coinbase, Gemini and PayPal are clearly seeing the importance of helping users comply with regulations. While the former are used to dealing with crypto payments, PayPal only launched crypto support in October.
But tax liabilities for PayPal users wishing to spend cryptocurrency from their accounts may limit the attractiveness of the service. As such, the integration of automatic tax reporting can prove useful for PayPal users who are dabbling in a new asset class.