The Uphold platform that’s widely known as a cryptocurrency resource to investors has made some headway in revolutionizing tax accounting for crypto.
Reports today at Coindesk show how Uphold, in conjunction with another company called Taxbit, is helping traders to change the ways that they report crypto gains.
“Michelle O’Conner, Uphold’s vice-president of marketing and communication, told CoinDesk that the move is part of an effort to make her company become more accessible for customers by simplifying the tax-filing process,” writes Nikhilesh De, quoting O’Conner this way on the utility of the new system:
“We’ll provide real-time liabilities, real-time information, what your liability will be when making a trade, how to reduce your liability.”
So what’s the difference?
Traditionally, companies have suggested that traders use a 1099-K, which is a general the report of income – for instance, PayPal uses a 1099-K to show money accrued over its platform.
What’s different with Uphold’s new system is that traders instead use a 1099-B, which is characterized as property from a barter or brokerage.
Reading the IRS definition of the 1099-B, it seems that reporting things this way gives more of an onus to the exchange or financial company accommodating the trade, listing three criteria where the form applies.
It looks like a nice way to offer cryptocurrency holders less liability when it comes to tax reporting.
The report by De talks about how the IRS has slammed traders in the past.
“The 1099-K reports income and is used by merchants,” De explains. “Because exchanges were filing crypto transactions as income, they effectively said their customers’ assets had greater value than in reality (or what the customers were reporting directly), resulting in some customers being audited and others receiving warning letters from the agency.”
That kind of glaring discrepancy is really verboten in tax accounting. By giving these individuals safe harbor for reporting their crypto assets, Uphold could be really establishing itself in the fintech world.
