In December we interviewed Patrick Larsen, the CEO and Co-Founder of ZenLedger, a tax software which allows users to import cryptocurrency transactions, calculate gains and income, and auto-fill tax forms like 8949 & Schedule D. Patrick takes us through how he started ZenLedger, the difficulties of tax burdens behind crypto trading, how the government views crypto when it relates to taxes, and what it takes to get more clarity on how cryptocurrencies are taxed. This blog is an follow up to that interview, which was recorded for our podcast in front of a live audience of our TF Blockchain community where Pat was able to interact with our attendees and answer their questions.
Taxation is an aspect of traditional financial institutions which most individuals have yet to master. Declaring income, filling out the details of the tax forms, and calculating just how much in returns should be given to the government is an herculean task for some people. This is one of the reasons why tax consultants and analysts have so much work to do. With recent developments in the supposedly abstract world of cryptocurrency and the entire crypto space, certain regulations are being put in place to introduce the taxing system for crypto transactions as well.
As one can imagine, this is a bad news for crypto traders, investors and miners who haven’t even gotten a hold of their actual tax returns. However, like most things in the development of societies, this request by the government and governing bodies has been met by a technological advancement in the area of financial technology. Management of taxes on crypto transactions has been rendered very easy with the introduction of software that helps in the analysis of transactions and all other aspects pertaining to crypto taxation.
To shed more light on this topic of managing taxes behind crypto transactions, Jonathan G. Blanco, the Founder and CEO of TF Blockchain and host of the TF Blockchain podcast, discussed this evolution with Pat Larsen, CEO and Co-founder of Zenledger. With his experience in accounting and taxation, Pat Larsen is an industry expert on the topic of discussion, and he explained how the tax regulations affected crypto transactions and the crypto space as a whole.
In October 2019, the United States Internal Revenue Service (IRS) announced that new regulations to further investigate and promote tax returns on crypto transactions would be enacted. Due to the growth of the crypto space with an influx of new users, expansion of crypto transactions through institutional investment and enterprising, as well as advancement of blockchain in corporate organizations, there is a larger ecosystem upon which cryptocurrency functions, and this transcends into mainstream activities. There are companies paying salaries with cryptocurrencies, and stores accepting crypto payment, which forces the demand for regulations within the financial institution, which ultimately includes payment of tax on crypto transactions.
The taxing of cryptocurrencies officially began in January 2020 and has since been in full effect. This results in the need for basic tax knowledge by most crypto traders and investors, in order to accurately report their tax returns and declare assets, with the recognition of cryptocurrency as a digital asset. An article by Matt Hougan, on Forbes highlights the basics of how bitcoin is taxed, and the Cryptotrader.Tax post gives a comprehensive guide to cryptocurrency taxes.
During this podcast session, Pat Larsen breaks down the essentials of managing tax on crypto transactions to include having a detailed transaction history, declare asset as long or short term holding, capturing gains and losses, and then producing a tax form –all of which Zenledger, a software tool, has been designed to help users handle.
It is common knowledge within the crypto sphere that a large number of crypto traders and investors are involved in investment capital and/or investment enterprise, which means that their transactions may be in multiple blockchains or history. Tracing this to accurately record gains and losses can be daunting for someone who isn’t versatile with tax reports and filing taxes. Nevertheless, it can be done in a couple of minutes by using Zenledger, which is a tax software that allows you to import all cryptocurrency transactions, calculate your gains and income, then proceed to auto-fill tax forms like 8949 & Schedule D.
The podcast session, which was held at the Seattle chapter of TF Blockchain, ended with a question from Pat Larsen to the attendees (and listeners):
‘What do you do with your crypto in the next financial downtime?’
You can listen to the full podcast session here.
Join a TF Blockchain chapter in your city and participate in the conversation, live!