Our latest Market Insights podcast delves into the tax implications for individual users of cryptocurrencies and how tax authorities are beginning to address these popular assets
The conversation may have moved passed (or even gone beyond) whether cryptocurrencies are here to stay, and it can be said with confidence that such digital currencies are beyond a fad and are now a part of our financial economy.
Indeed, cryptocurrencies have established legitimacy across the globe among individuals and governments alike. In the US, for example, more than 30 million individuals — or about 12% of the general population — own some form of cryptocurrencies. And by the end of 2022, that ownership level is expected to be 19%. Further, the US Internal Revenue Service (IRS) is ready or mostly ready to deal with the reporting of cryptocurrencies and other digital currencies.
In the latest podcast available on the Thomson Reuters Institute Market Insights channel, Nadya Britton, Enterprise Content Manager for tax & accounting at the Thomson Reuters Institute, speaks with Kell Canty, a fintech pioneer, early Bitcoin adopter, and co-founder of Ledgible, a crypto tax and financial reporting platform company. (In 2013, Canty created the first regtech in Bitcoin with Coinpliance which later was sold to BitPay; he also was a founding member of the Regulatory Affairs Committee of the Bitcoin Foundation.)
You can access the full podcast with Thomson Reuters’ Nadya Britton and Ledgible’s Kell Canty here. And you can see all the podcasts on the Thomson Reuters Institute Market Insights channel here.
In the podcast, the pair discuss crypto’s adoption by individuals and institutions as a means of conducting speculative investing and turbo-charging certain businesses through access to a new means of payment and billing. In addition, they talk about how the US government’s recognition of cryptocurrencies’ revenue potentiality created the pathway to cryptocurrencies’ eventual taxation and potential regulation.
In the podcast, the pair also delve into this April’s past tax season, the crypto market’s recent steep decline, what’s ahead for the more extended tax season that ends in mid-October, and how tax preparers can get ready to service those clients who have crypto portfolios that were battered by the recent volatility in the crypto market.
The podcast also examines the impact of the infrastructure bill signed by President Biden last November that included legislation on crypto-assets. The new rules requires brokers and cryptocurrency exchanges to issue a 1099-B, an IRS tax form used by brokerages and exchanges to record customers’ gains and losses during a tax year. Simply put, brokers and cryptocurrency exchanges that have customers who buy, sell, or trade crypto now must notify the IRS directly of all crypto transactions.
As explained in the podcast, this change will mean tax reporting challenges for crypto investors. In the electronic filing, for example, there is a box to check — if it is checked, filers know (and the IRS expects) that a Supplemental Tax Form 8949 will follow. As investors and tax professionals embark on these new waters of reporting, it will be imperative that financial institutions, tax & accounting firms, and law firms needs to be educated on crypto tax implications for their clients.
That means that tax & accounting firms need to understand the importance of ensuring that their tax professionals can get up to speed and stay current on any tax law changes and the requirements of the latest support software.
This podcast interview was conducted on May 26; subsequently, on June 7, Ledgible announced a round of investment funding, which included an investment from Thomson Reuters Ventures.