Utah-based tax software firm TaxBit has launched the TaxBit Network – a partnership between TaxBit and 20 top crypto companies including Coinbase, Gemini and SuperRare that will allow clients of participating institutions to access free 2021 crypto tax forms.
Austin Woodward, co-founder and CEO of TaxBit, told CoinDesk he hopes making the software more accessible – both in terms of cost and ease of filing – will democratize and demystify the crypto tax process.
Crypto taxes have historically been cumbersome, confusing and often expensive, with annual filing costs running into the thousands of dollars for many crypto holders, Woodward said. For crypto tax do-it-yourselfers, consumer tax aggregators charge by transaction volume, making high-frequency trading particularly expensive come tax season.
The TaxBit Network includes participants from crypto native companies BlockFi, OKCoin, Paxos, Coinbase, Strike, Coinlist, CEX.io, Blockchain.com, Gemini, Uphold, FTX.US, Binance.US and Celsius Network; more traditional fintech firms like SoFi, PayPal and its Venmo subsidiary; and decentralized finance startups like SuperRare and Uniswap, among others.
Woodward told CoinDesk that TaxBit Network’s tax forms will be free to all users, regardless of transaction volume.
“So, no longer if you have a bot trading in the background do you need to worry about racking up a big tax bill when it comes to preparing your taxes,” Woodward said. “We’ve removed the concept of transaction limits, which no one in the industry has ever done.”
Woodward also hopes that, by making crypto taxes easier, it will help to close the much-discussed “Tax Gap” that the Internal Revenue Service (IRS) has partially attributed to undisclosed cryptocurrency capital gains.
“Our belief is that it’s not because the crypto community is purposely trying to evade taxes,” Woodward said of the tax gap. “It’s been way too costly and too complicated to figure out.”
Woodward told CoinDesk the response from the crypto industry has been very positive, and expects more companies to join the TaxBit Network before the end of tax season in April.
“The crypto companies want to be in good graces with regulators. They want to help their users report their taxes,” Woodward said. “This isn’t something that has been due to a lack of desire, right? It’s a technological hurdle, and it’s a cost hurdle.”
Participating crypto CEOs seem to agree with Woodward’s assessment.
“Compliance is a key pillar at Gemini and proactively providing our investors with access to tax reporting tools helps our clients stay on top of their cryptocurrency tax obligations while regulation continues to evolve,” Tyler Winklevoss, CEO of Gemini, wrote in a press release.
Users will be able to access the tax forms starting Tuesday, either through the TaxBit Network’s website or, in most cases, via the participating institution’s app.