We use cookies to improve your experience and optimize user-friendliness. Read our cookie policy for more information on the cookies we use and how to delete or block them. To continue browsing our site, please click accept.

How Taxes Impact the World of Cryptocurrency

Founded in Tech Episode 5

Cryptocurrency is taking off more than ever. It has taken the world by storm and it feels like every day brings a new discovery to the ecosystem. But as the market continues to grow, a lot of questions surround the nitty gritty aspects like how taxes work for this new asset class.

In this episode of our Tech Tips series, Mark Eckerle sits down with Withum’s Ryan Babiak, Tax Partner, to discuss taxes and how they impact the world of cryptocurrency.

Don’t miss out on new episodes from Founded in Tech! Listen and subscribe on Apple Podcasts, Google Podcasts or Spotify.

 

Explore Other Episodes
 

This podcast was transcribed through a third-party application. Please disregard any misrepresentations.

Mark Eckerle:
Welcome to this episode of founded in tech. I’m your host Mark Eckerle. And today’s show is part of our tech tip series, where I sat down with Ryan Babiak, to talk about tax reporting for cryptocurrencies and virtual currencies and other digital assets. In today’s episode, we discuss how to properly report virtual currencies on your tax forms for 2020, how the IRS is currently evaluating these digital assets and then various tips regarding mining, staking income, hard forks, and much more. This conversation was very insightful with talking with Ryan with a lot of great takeaways. I hope you enjoy as well. Hello everyone. Welcome to today’s show today. I’m joined by a recurring guest Ryan Babiak. You take a dive into cryptocurrency tax reporting. Hey Ryan, how you doing today?

Ryan Babiak:
What’s going on, Mark? The end of a long week, but I’m still in it. And I’m showing my Withum team colors for anybody that actually watches and not listen only.

Mark Eckerle:
Awesome. So, so for a refresher, why don’t you give our listeners a quick intro to your background, um, and what you do here at Withum?

Ryan Babiak:
Sure.

Ryan Babiak:
So I am a tax partner in our technology and emerging growth group. Um, I’ve been doing tax work for a little over a dozen years. Uh, came to Withum through a merger at six and a half years ago. There was a really big need to support the growth of our, our tech group here. So I dove right into that. And then, uh, I would say probably two and a half years ago, uh, coinciding maybe with the ICO craze. There was, um, we had a lot of companies in the blockchain space and they, they had some very technical questions. So, um, you know, we had to really, uh, get a team including yourself, of course, right Mark, to, to start understanding and, and providing really valuable advice to these people in a technology that, uh, is far surpassing the regulatory, um, uh, infrastructure around it.

Mark Eckerle:
Yep. Yep. This is definitely a topic that is near and dear to my heart as I work closely with, with cryptocurrencies and digital assets in various aspects. Um, so I think this, this episode will be very important for a lot of listeners just based on the fact that 2020 was a pretty big year. Um, if you think about it from a, just strictly a pricing perspective, right. Um, with Bitcoin and other digital assets reaching all time highs, um, I think it’s gonna, there’s definitely going to be more of a need to reporting this on your, your, your tax forms. So, so jumping right into it, um, 2019 was the first year that the IRS had a specific question. I believe it was on schedule one. Um, worded something to the effect of at any point in time during the year, did you receive buy, sell, transact with, with virtual currencies? Um, and ironically enough, I believe in 2020, they’re moving that to the front page of 10 48.

Ryan Babiak:
Yep. Page one. And we’ll be right front and center. Absolutely.

Mark Eckerle:
One of the first questions. So they’re definitely putting this as a priority. Um, and I think it’s going to be important for a lot of people to report this, this year as though they will be cracking down a lot harder than they have in the past. So, so jumping right into it, why don’t you give our listeners a quick overview of what digital currencies or how the IRS calls it virtual currencies and what these look like and how to have these reported on your tax forms?

Ryan Babiak:
Yeah, so, you know, six years ago in 2014, there was a, in the community very well. Um, IRS notice that was issued that didn’t say a whole lot other than the IRS was treating virtual currency as property. So right off the bat, they, they, they had a position, um, right or wrong, um, whether it really fits the intent of how people transacting crypto, um, the answer was easy. Do you think of it no different than you would? Um, anything other than cash stock is most commonly the example I like to use, but, um, you know, we fast forward a bit, um, and we’ve talked about this too. We’ve given these presentations, I’ve done a bunch of tax presentations and for the longest time I could just copy and paste last year’s presentation with some updates, you know, what’s going on in the news. And then at the end of 2019, we finally got some guidance back up from the IRS.

Ryan Babiak:
Um, they, they had a, um, they issued a ruling on how, um, hard forks and airdrops are taxed, but more importantly, I think, is they developed a series of, uh, of FAQ’s that’s published on their website. I think there’s 48 or 49 of them that lay out a bunch of common situations and how to treat the transaction, because it’s not as simple as just saying crypto’s property and we’re done. I mean, there’s a lot of interpretation around that. And I think for the last six years we’ve had, um, the guidance around, um, you know, how did, how to guide your clients how to guide companies has come from attorneys and CPAs and the industry just talking amongst itself in an agreement and how we all practice things commonly.

Mark Eckerle:
Yeah, exactly. And it’s the best example, like you said, the analogy here is, is stocks, right? And when you, if you buy and sell stocks, you get 10 99, a 10 99 B from your broker. Um, and it’s pretty straightforward to map that out, as far as your tax reporting. Um, in this case, it may be a little bit different because you’re not necessarily getting those tax forms from various exchanges where you’re buying and selling. Um, so, so for, for newcomers into this space, why don’t you break down so we know it’s this property, um, what does the tax implications look like and how is it treated? So the difference between a capital gains tax, what does short-term versus long-term mean? Um, and then there, there is also the option of depending on how you use your assets, it could be treated as ordinary income, right?

Ryan Babiak:
Yep. Yep. First and foremost, because crypto tokens coins, because they’re property. Um, any time there is an exchange, even an even if that’s just exchanging from one coin to another, it is a taxable transaction. And that becomes very difficult with, with capital gains and losses because on, uh, um, uh, well on a, on a personal perspective like you or me, um, there’s a limitation on how much you can deduct in capital net capital losses in any one year it’s only $3,000 carries over forever, but there’s some planning that has to happen with that. And I think sometimes people who aren’t, um, knowledgeable in the tax consequences may not know that. And then, um, you know, if it’s held through a corporation, there is no net capital loss. It just carries for five years, you could lose the benefit. And crypto is such a volatile area that, um, the value is always going up and down.

Ryan Babiak:
Like you said, it hit all time highs. We’ve had a little bit of a pullback and, um, you know, that’s just something, I think people have very difficult time tracking. And, um, so if I’m using crypto as, um, its intention being a capital asset, I’m using it to gain wealth, I’m using it as treating it like a stocker security. Um, when I get rid of it, it’ll receive capital gains treatment, which is nice because if you hold it for over a year, um, the tax rates are, um, you know, reduced from ordinary income like you and I are, would have on our compensation. Now on the other side of this, and this came up quite a bit when the, when the ICO craze was going on, I had companies that were, um, issuing Bitcoin for, uh, as a form of salary or compensation. So in that regard, that income is going to be ordinary, no different than you getting cash for performing your services to Withum. Um, the challenge again is always, really, it’s been around record keeping.

Mark Eckerle:
Okay. And so you mentioned certain, um, people that might not be savvy in the space from a tax perspective. Can you quickly go into, again, certain planning procedures that may be around on your end? Like for example, wash sales is a very hot topic, um, where you can, you can kind of sell it year end, and then rebuy in January just to base on certain price points to carry forward that loss pretty quickly go into what a wash sale is and

Ryan Babiak:
Yeah. Yeah. And watch it as I think I guarantee you, they’re not being reported correctly and consistent consistently in this space where if you’re working with the broker on securities, it’s, it’s built into their platform functionality, right. When they issued you a 10 99 at the end of the year, but a wash sale it’s effective without getting too technical. You are, um, selling property at a loss, recognizing the loss, and then you’re replacing it within a short timeframe. So that economically you’re no worse off than you were before. And you just created a paper loss for yourself. So what happened is that wash sale get ignored and, you know, you would, you would update the basis of, of the new security. Um, you know, and, and it’s, it’s, it’s for people who are high buying traders. I don’t know how you ever track that without it being controlled by a proper, um, a proper broker or exchange that has IRS reporting requirements.

Ryan Babiak:
And, and, and, and I’m sure we’ll go into it in a little bit, but, um, you know, there, there is right now, no requirement for a crypto exchange to issue 10 99s. And we’ll, you know, I think we’ll talk about in a little bit, but it’s a, it’s definitely an area of the IRS is going to send, those are going to start focusing on. They’ve got a lot going on, right. Unprecedented year, a lot going on, who knows. It took six years to get from the first IRS notice to a, to another update at the end of 2019. So it’s gonna, it’s gonna take some time.

Mark Eckerle:
Yeah. One, one step at a time, right. We’re slowly moving in the right direction.

Ryan Babiak:
Slowly.

Mark Eckerle:
Um, but, but transitioning, it’s the perfect segue from wash sales to, to figuring out, I guess, certain realized gains, right. So when you’re, you’re, you’re calculating your realized gains, um, for your tax returns and kind of figure out what that looks like. What is the, I guess from IRS perspective, what are the approved methods of calculating those realized gains from your cost basis, as far as, um, like acceptable methods?

Ryan Babiak:
Well, people want the best of all worlds here and minimizing their tax gain, right? So, um, there’s a couple of different ways you can, you can look at how you sell your crypto and are you getting, you know, you could have a last in first out approach where you sell what you acquired most recently, you would expect. Um, if something’s appreciating over time, that would have a higher basis, right? And if you sell something at a higher basis, you’re going to have a lower gain on that. Or if you use the first in first out method that will result, you would think in the worst case scenario. Um, again, this is in most cases, given how volatile the crypto industry can be. That’s not a guarantee. And then the one that I think most people want to have is, um, a specific identification where you can actually say, okay, I’ve got five, lots of Bitcoin.

Ryan Babiak:
I’m going to sell this specific lot. And, uh, that was one of the questions that was asked of the IRS to opine on is what can we use? And the answer is, uh, you know, FIFO first in, first out, that’s the default method that you can use, but if you are able to, um, provide support or at least, you know, if you’ve ever asked for the information, you can use this by specific identification method and a few things have to happen. I mean, you’ve got to, you’ve got to document, um, you know, the unique digital identifier, like, like private and public keys. Um, you need to show the date and time that each lot was acquired. You need to be able to, um, show the basis, right. Which is basically simplest terms, what you paid for it. Um, and the fair market value. Right. And then the same is true when you sell it. So you need all the pieces that are there similar to what you would do if you had your, you know, your own equity, brokerage account and you sell shares in a public company.

Mark Eckerle:
Yeah. And I think, like you said, I think specific identification is probably the most preferred method. Um, so people can really have a hands-on focus of our hands on it account of what their, their tax basis would be. Um, but it is, it is pretty burdensome, right? You gotta go through that analysis of really tracking your lots, your buys, your sells, um, and allocating those transactions across the board. So it’s a little more hands-on as far as FIFO can be a pretty simple formula driven.

Ryan Babiak:
Yep. I agree. Yep.

Mark Eckerle:
So, so transitioning over to, um, another, another kind of hot topic in this space where there’s, there’s a bunch of different alternative coins out there, alt tokens as a lot of people call them. Um, what would that look like from a tax perspective, if you received those tokens via airdrop or hard fork, a change in the protocol from Bitcoin cash, which happened back in 2017, um, and then alternatively, what does mining income or, or staking income look like from a tax perspective and how should individuals treat those rewards if you will, the new assets?

Ryan Babiak:
Sure. Um, so, so, so hard forks, airdrops were covered under, um, the ruling that came out at the end of 2019, and it all comes down to one of the most, um, simple foundations of, um, gross income and the tax law. And that’s an accretion to wealth. And if you know, a hard fork by, in of itself, just by changing the protocol, you’re not, you don’t have anything more than you had the day before. So there’s no accretion to wealth. It’s not a taxable event. Whereas an airdrop typically would result in that accretion to wealth and it would be taxable and, and mining, you know, is, um, you know, in most cases it’s really, you’re getting paid in the form of crypto for, for services rendered to the blockchain, right? So, um, in almost all scenarios, the, the airdrop and the mining is not going to be a capital gain. It’s going to be, um, taxed as ordinary income as if you, you it’s, it’s in return for the effort of your services.

Mark Eckerle:
Gotcha. And then how would, uh, donating crypto, right. If I donate cryptocurrency assets, um, there’s a bunch of nonprofits out there that are accepting this now as, as an alternative to cash. Um, so what would that look like and how has that reported on your tax return as well as from crypto as opposed to cash? Or is it, is there a way to enable that around?

Ryan Babiak:
Yeah, there is there’s um, you know, you said when you started, the question was that, uh, the foundation, the, um, recognized 5 0 1 C3 charity, right. They have to be able to accept crypto first. So I’m assuming that hurdle has been passed and you can, and you can donate Bitcoin or, or each rate. Um, your donation is equal to the fair value of what, um, the, that is going to be at the point that, that you, uh, that you make the donation. Um, there are rules. I’m not going to get into them right now, though, about how to determine value and whether you need an appraiser over a certain threshold, but, but the, the, you know, the famous catch-all term is consult your tax right about all that stuff, but, but pretty much it’s, you’ll get a potential deduction for the fair value of what you donate.

Ryan Babiak:
There are limitations on a personal level, which is probably the most common scenario that we come across, um, as to a certain percentage of your gross income that you can deduct. Um, there, there are splits between how much you can do in cash and how much you can do in property. And on the other side, that, that, um, we take the donation, we come up with the value and we put it into a bucket off to the side. Um, it’s part of what are called itemized deductions. So you need to factor in any other itemized deduction that you have on your tax return, such as, um, state income tax or property taxes, interest, um, on your mortgage, if you’re a homeowner, um, and a few other things. But if that amount, when they’re all aggregated together, exceed what is called the standard deduction, which is the government’s freebie deduction off the top of your income.

Ryan Babiak:
Um, and that number is indexed every year. I can’t remember where we’re indexed at this year, but let’s say apart in the neighborhood, I believe it’s $13,000 on an individual. And then double that for a married couple. Um, if you’re over that amount, you know, and your aggregation of that bucket, then you take that deduction instead of the standard deduction. So you need to understand, uh, your tax profile a bit to know, obviously if you want to be charitable. Absolutely great. But if you’re doing it also with the tax planning, um, in mind, you’ve got to understand what your, your tax profile looks like

Mark Eckerle:
To, to not go too far down it, you mentioned, and I’m not a tax professional by no means. So I’m just here picking your brain, basically

Ryan Babiak:
You’re enough to be dangerous. Mark. I know that.

Mark Eckerle:
That’s my saying right there.

Mark Eckerle:
If, if I’m an individual and I have reached my cap for cash donations, right. I think you said, you said there’s a cash profile and then a property profile. If I have reached my cap from a cash perspective, and I want to try and increase my threshold above that standard deduction, can I instead donate cryptocurrency convert cash on the spot, donate crypto and increase my standard deduction or my itemized deductions to get more of a benefit on my tax return?

Ryan Babiak:
Um, if you are going to come. Yeah. The only thing that would you’d have to consider is what’s the tax gain or loss on that. So you could do that and, um, you know, convert into cash so that your threshold on the cash donation is higher, but you have to consider what the tax gain and loss looks like on that conversion.

Mark Eckerle:
Gotcha. Okay. Because I’m just trying to think of an alternative method, just again, all about tax planning, right? Yeah.

Ryan Babiak:
I, I would agree again, you just you’ve, you’ve got it. And it comes back to me being the most important part of this is just record keeping and understanding what you have and how you got it.

Mark Eckerle:
Yeah. And definitely consult your tax professional as you’re going through this process to really know your tax profile. Right. Because not everyone tracks that stuff, um, on a regular basis. So it’s good to know. So, so jumping right with the IRS perspective, right? The crackdown that we alluded to earlier, they’re going to start looking at this with more of a narrow focus. Um, moving the question from schedule one to the front of 10 40, what they started doing. Um, last summer, the summer of 2019 was issuing some letters. Right. And I think they started doing that again this past summer. What does that, what are those three letters? What are the consequences? What does an individual have to be on the lookout for? Should they be worried if they received those in the mail? Um, and what are the, I guess, the next steps or actions to take?

Ryan Babiak:
So I’m not going to get into what they all are, but the, the, um, the, the large business and international division was running up this, uh, compliance campaign. And they actually started it in 2018. But in, in, I think in, in our experience, we only started to see this, the notices come in, um, in 2019 and moving forward. Um, and, and what they are is, um, you know, I’ll go through the, the, the letters. Cause if you have one again, call your tax advisor, right? So it’s the, the, the, the common letters are six one seven four six one seven four a and then a six one seven three. And, um, there’s different levels of, uh, urgency attached to these. So, uh, effectively what they are saying is in some way, shape or form from lowest level urgency to most urgent is, um, you know, the six one seven four is just an inquisitive information letter to say, you know, the, the IRS believes we’re writing you because we think you may have one or more accounts containing virtual currency that you may not know the proper way to report these transactions.

Ryan Babiak:
You don’t know what the amounts are. They don’t know what the liability is. If there even is a liability. And at the bottom of the letter, it does say you don’t need to respond to this letter. So I’m sure people who’ve received. These are just folded up, put it in their pocket. That’s the best, that’s the best letter to get? Yes. The one that that’s heightened a little bit beyond that as the six one seven, four a, um, all that says it’s, it’s, it’s very similar. Other than that. And by the way, they don’t tell you what additional information they may have. That’s attached to your name or your social security number, or your employer identification number. Um, this one is very similar, but it says you don’t need to respond to this letter. However, we may send additional correspondence about potential enforcement in the future.

Ryan Babiak:
So that’s, uh, you know, uh, keep checking your mailbox letter. And then the last, the last one here is, um, the six one 73. And that is where, um, the IRS knows you’ve got accounts. And, um, you know, you need to just respond, uh, that you, you know, a recognition that you’ve received the letter, um, explain the actions that you, you know, if, if you are compliant, explain the actions you’ve taken to become compliant. Again, it’s not a notice that has a liability. Um, what they may do, though, if you don’t get back to them by a response date is they may refer you for an audit and you may get a letter in the mail and it says, we’re going to audit you. Okay.

Mark Eckerle:
So, okay. Sorry, go ahead.

Ryan Babiak:
No, go ahead. Go ahead.

Mark Eckerle:
No, I was gonna say

Mark Eckerle:
So quick summary. So the first one is there’s, there’s no action. That’s explicitly stated on the, on the letter,

Ryan Babiak:
Correct.

Ryan Babiak:
Second one is they may be following up.

Ryan Babiak:
But there’s no action at the current moment in time. Yup.

Mark Eckerle:
The third one is you do have to respond. There is a risk.

Ryan Babiak:
If you don’t respond, we may audit you. Yeah.

Mark Eckerle:
Okay. Understood. Yep.

Ryan Babiak:
Um, yeah, there’s event. There’s one more part of this too, which is, um, not related to the IRS, thinking that you’re not don’t to say hiding assets, but not, maybe not understanding your obligations to report them. Um, the we we started talking about to how people are, you know, need to be, uh, uh, diligent about the record track, uh, keeping track of, of their holdings. You know, I think people may realize that, um, they’re not getting 10 99s from certain exchanges, right? And, you know, we worked with some exchanges to, in, in this capacity. And what’s your reporting obligation to your, your customers. And because exchanges are not considered a, like a broker dealer of securities under the eyes of the IRS at the current moment in time, they’re not obligated to issue a 10 99 B, which would have your typical think of your own brokerage statement, where you hold equities, that would have everything under the sun that you need on it, right?

Ryan Babiak:
What you hold, how long you hold, what you acquire for, how long you’ve held it, what’s unrealized. What’s realized what goes on your tax return. Is it longterm, uh, gain or short-term gain or loss? Um, there’s even a box near to say that the IRS has, I’m sorry, the exchange or broker has, or has not provided the basis information to the IRS. Uh, crypto exchanges are not required to do this. And quite honestly, because of the nature of the ecosystem and transferring between wallets and exchanges and people, uh, it’s very difficult if maybe not impossible right now to make sure that reporting that basis information, right, what you bought for. So you can determine the gain or loss. Um, I think it’s very difficult, if not impossible for them to report that accurately. So what a couple of exchanges were doing is issuing 10 99 Ks as what are considered for third party settlement organizations.

Ryan Babiak:
The problem with this is they only report the gross amount of transactions that have happened with your account during the year. It includes nothing about gains losses or tax basis. The IRS gets a copy of this notice and they may view it and say like, Hey, Mark had a million dollars of, of gross transactions pass through XYZ exchange. This year, you don’t report that million dollars on your tax return. You get a notice, a civil penalty notice CP 2000. That basically says, there’s a mismatch. We expected to see this, you reported this, and now you’re, you’re in the, you’re under the microscope. Now you’ve got to explain what happened. And it’s almost as if you’re under audit anyway, because you’ve got to go through all your records, to be able to confirm why you didn’t report the number on that note. It’s, it’s a, it’s a, I think becoming a huge issue. And I think a lot of exchanges have scaled back knowing that, you know, they took a closer look. They weren’t required to file these either. So I think we’re going to run into a year maybe where we don’t have a lot of reporting at all, coming to the IRS from these exchange.

Mark Eckerle:
Yeah. I think you, you really hit the nail on the head there where, um, individuals wanted exchanges to be more compliant. Um, like they’re brokers, like their stockbrokers, um, and get these 10 99 B’s. Um, and so they started issuing some 1099bs 1099ks. Um, and like you, you alluded to earlier the, I think PayPal now, um, who who’s recently entered the space is issuing 10 99 Ks. And, um, I think a lot of people should be prepared to receive those CP 2000 letters, but it’s not necessarily that you should be alarmed of, cause it just might be a possible inaccuracy and reporting. Right. Is that correct?

Ryan Babiak:
It is. You have to explain it. Um, we’ve, we’ve seen it with just regular operating companies that may act as a facilitator of a transaction. You know, they, they take a payment on behalf of somebody, they take a cut for whatever their services and then they, they, they share it on think of like a, a, um, like a, um, like grub hub or a door dash might be a good example where they’re taking your, your full payment and then passing the piece onto a restaurant, right. So they’re issuing these 10 99 Ks or should be. Um, and the person who’s receiving them, you know, it’s not matching up necessarily to, or sorry, the door dash would get the 10 99 K, but that’s not all their revenue. They’ve got to explain then to the IRS. If they got a notice that it’s a passed on. Yes. I collected this. My revenue is only this piece and I pass the rest of it on to, um, you know, to the merchant similar, similar scenario.

Mark Eckerle:
And it, it’s definitely important for people to realize that, like, if you’re receiving a letter from the IRS, you don’t necessarily have to be alarmed. Right. It just kind of, you have to explain the situation to them and bring them up to speed of what the transactions and what actually happened.

Ryan Babiak:
Um, but still makes you nervous. You got a notice in the mail and maybe, maybe you don’t know what your tax position is because you just don’t know, uh, how tax, uh, uh, crypto works. Yeah. May be getting yourself into a situation. And, and even if, even if there’s not some large exposure out there, now, what you’ve got to do is you’ve got to get people involved, whether you’ve got to, you know, maybe you get an attorney involved, maybe you get an accountant involved. That still takes up time and effort in your day. And it just, you know, it, it’s a, it’s an area that I know the IRS has said they will be providing guidance on my guess, is that sooner or later exchanges will be required to issue 10 99 B’s, which I think is, you know, um, people that are, maybe don’t want to disclose all their assets are probably not gonna be thrilled about, but it’ll, it’ll make a lot of problems go away for a customer. It’ll create whole heck of a lot of problems for the exchange to make sure that they can report this stuff accurately.

Mark Eckerle:
Yeah. But it at the end of the day, if the IRS is looking to have more people reported, I think that would be the best method. Um, and to receive those statements as opposed to everyone kind of have to do it on their own. Um, so that’s definitely, I fully on board with that. And, and we covered a lot here today. So I like to, I like to wrap up all of our conversations, um, with all of our guests, with one recommendation or tidbit of information that you would like to pass along. You’ve been working in this space for awhile. Um, you’ve seen a lot of different things with various experiences and your time. So what is one thing that you’ve come across most often that you encountered with, with various individuals or companies that they wish they had known in hindsight, right? Like, wish they had previously known, um an experienced, uh, earlier on. So is there anything that you could pass along to people to kind of be proactively thinking about?

Ryan Babiak:
Yeah, I think it’s really comes down to organization and record keeping. I don’t want to, you know, keep saying that, but it’s, it really is true. It’s um, you know, and this is something I’ve repeated to at any, in any type of, uh, you know, podcast or conversation or, or, um, presentation environment is that, um, we’re at, we’re at a point where we’ve got this, this fantastic technology of blockchain and, you know, it’s, uh, it always takes the regulators time to catch up to technology, you and I know that right. We work in technology every day. We totally understand that, but, uh, people trying to the salt, the infrastructure’s not there to support it from a, uh, both a financial accounting and many scenarios tax perspective. So people are resorting to spreadsheets and I love spreadsheets, you know, and just as much as the next person, but I think if people are, um, heavy traders and they’ve got, you know, tens of thousands of transactions, that’s a heck of a lot of time to have to manage, uh, your, your, your tax compliance, whether it’s yourself or, or it’s your tax account, right.

Ryan Babiak:
It’s going to cost you money and compliance fees. Um, it’s difficult, you know, there, there are software companies out there that provide great software. The challenge still is that, uh, you, the, the data in is a data out is only as good as the data in. And if the data is coming from multiple places, it’s, it’s very difficult, um, to, to get the whole picture. So I think it’s it’s organization. And, um, you know, if there’s a way to try to limit where you’re holding everything and get things kind of reported under one roof, right. Similar to how you and I probably do, like where we, where we budget when you use like mint.com, right. You can pull in all your credit cards and all your brokerage account, so you can see everything together. If there’s a way to, to think about that and get that done, that’ll definitely help out in the long run.

Mark Eckerle:
Yeah. Compiling that data, like you said, we’re in such an emerging technology and working with such a new asset class. Um, and it feels like we’re, I don’t want to say going backwards, but we’re staying stagnant working with Excel spreadsheets. Right. And you alluded to, there are there all softwares out there. So for a lot of the, the, the active traders in this space, if you have a lot of transactions, there is a way to aggregate that data. Um, but you hit the nail on the head where it’s, the output is only as good as the input, right. So you can have your assets in multiple places, but it may, uh, it may be a little bit time consuming to compile that data, uh, depending on the various places that it’s stored.

Ryan Babiak:
Yeah, absolutely.

Mark Eckerle:
Awesome. Well, that wraps up our discussion today, uh, for reporting cryptocurrencies on your tax forms. Thank you, Ryan, for joining me. Uh, if you’d like to learn more, please visit withu.com for more information. Uh, we have a specific digital currency and blockchain technology landing page. So please visit that. And, uh, looking forward to talking again down the road.

Ryan Babiak:
Thanks Mark.

Mark Eckerle:
Thank you for tuning in.

Mark Eckerle:
If you liked, it wanted to hear more, you could follow us and subscribe, and we’ll see you next time on founded in tech.

Previous Post
Next Post
X

Insights

Get news updates and event information from Withum

Subscribe