Bitcoin and other cryptocurrencies have lost more than half their value in recent months, dropping from a market capitalization of $2.9 trillion to $870 billion, triggering renewed calls for regulators to do more to protect consumers from volatility in the market.
And with new regulations expected to be implemented in October, tax season is likely to get more complicated for crypto investors.
“It’s very hard for a consumer to be managing their own position in the central crypto market with current tools,” Harvard Business School professor Scott Duke Kominers told the Harvard Gazette in a story published July 18.
But just because crypto has experienced giant losses lately, it doesn’t mean the virtual currency will go away.
The global user base of cryptocurrencies increased by nearly 190% between 2018 and 2020, accelerating further in 2021 when El Salvador became the first country in the world to accept Bitcoin as legal tender, according to Statista.
While many people are still not invested in crypto, they are becoming increasingly familiar with the industry. In 2021, 18% of the U.S. population had never heard of it, down from 21% in 2019, according to Statista.
The public’s increased familiarity with crypto is likely the result of the price increases of Bitcoin (CRYPTO: BTC) in early 2021, Tesla Inc.’s (NASDAQ: TSLA) growing involvement in crypto and PayPal Holdings Inc . (NASDAQ: NASDAQ:PYPL) making it possible to buy virtual currencies using a PayPal wallet.
Tallying Taxes Transactions with virtual currency such as BTC or Ethereum (CRYPTO: ETH) are taxable just like transactions in any other property.
Crypto transactions have so many nuances that it’s important to have software to track them. But even though everything is recorded on the blockchain, extracting data for accounting purposes isn’t as easy as it may seem.
Accountants and tax professionals can reportedly simplify crypto bookkeeping by using software such as QuickBooks, Xero Ltd. (ASX: XRO) as their general ledger and Ledgible as their subledger, which integrates with Quickbooks, Xero and every other accounting software.
As an example, financial institutions, corporations and accounting firms use the Ledgible platform for tax, accounting, and 1099 generation for billions of dollars of crypto assets.
Atlanta-based Ledgible has two core business lines — professional tax and enterprise accounting.
The company’s tax practice focuses on the professional market, including accounting firms, certified public accountants, tax advisers and the customers who use these services. Ledgible has reported that firms can connect their clients’ portfolios and automatically calculate gains and losses to properly report crypto transactions.
Its accounting practice serves enterprises, companies that hold crypto and banks and institutions that handle crypto. The Ledgible Crypto Enterprise Accounting application is meant to streamline cryptocurrency and digital asset accounting operations for enterprises and institutions.
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