ZenLedger: Cryptocurrency Taxes Are Simple. You can even save on them!
Tax season is traditionally one of the most difficult experiences for US citizens each year. However, not only Americans pay American taxes. Any company whose activities are licensed under US jurisdiction is also subject to United States taxation. Everything related to taxes is associated with great stress and headache. People are nervous about everything related to money — they are afraid to get confused, to fill paperwork out incorrectly, and get a fine.
Every year from January 1 to April 15, US taxpayers report their wages and income in declarations, and this time brings to life all the financial problems that have occurred to an individual or organization during the year. The tight and short turnaround for tax obligations associated with the annual filing deadlines make it almost impossible to avoid a collision with this main source of stress in the lives of citizens. Is more stress possible? Oh yeah. It is more than possible when it comes to taxes on income from cryptocurrencies.
Cryptocurrency taxes are becoming a reality
For several blissful years, cryptocurrency holders and traders successfully avoided this painful time of year. The young industry did not fall under the scrutiny of the IRS, and only the most conscious crypto-investors opted to declare their income related to cryptocurrencies. The matter was aggravated by the fact that tax authorities and regulators could not decide the appropriate tax treatment for blockchain money.
In 2014, IRS made an attempt to regulate this area, but there were many possible interpretations of its ambiguous guide to crypto taxes. In October 2019, the IRS released a new cryptocurrency taxation guide in the form of a full FAQ and an official revenue order numbered 2019-24. The guide made it clear which cryptocurrency transactions were subject to taxation, and which were not; it touched on the perplexing topics of soft forks and hard forks, airdrops, and donations. According to the official IRS guidelines, Bitcoin and other cryptocurrencies should generally be treated as property, not as currency, in terms of taxation.
It would seem that everything is simple — study the guide and act as it prescribes. In reality, a lot of confusion remained. The small number of crypto owners’ tax returns began to worry the IRS more and more. In May 2019, Credit Karma score service reported that “fewer than 100 people have reported gains from cryptocurrency investments out of the 250,000 Americans who have already filed their federal tax returns this year.”
IRS buckles down: tracking, emails, and threats
For the IRS, the need to reach out to noncompliant cryptocurrency owners has become apparent. In July 2019, before the release of the new cryptocurrency tax guide, the IRS began sending out thousands of warning letters to cryptocurrency investors suspected of tax evasion.Traders, cryptocurrency enthusiasts, miners, cypherpunks, and crypto startups should realize that from now on, the IRS no longer wants to turn a blind eye to e-money income. The IRS is tightening control over crypto investors, and moreover, the tax authorities already have levers of control and pressure that they are eager to employ.
One version of the IRS’s warning letters (CP 2000) requires a written response from the recipient. In this type of letter, a specific amount of tax debt is indicated, which, according to the IRS, is assigned to the recipient of the letter. The written response must indicate whether the crypto investor agrees with the information specified in the letter.
Tax lawyers advise clients that the IRS’s threats to bankrupt tax-evading cryptocurrency holders should be taken seriously. Since 2009, more than 56,000 Americans who hid money in offshore accounts have been forced to pay a combined total of $11 billion to solve tax issues.
The head of the IRS criminal investigation department Don Fort said that in the near future many of these criminal cases will be made public in order to show crypto owners the gravity of tax evasion crimes.
Penalty for non-compliance with tax requirements
In cases of tax evasion and underpayment, the IRS establishes a late payment penalty of 0.5% per month on the amount of unpaid tax. The accrual of interest begins from the month in which the tax was due. In total, this figure cannot exceed 25% of unpaid taxes, but depending on the initial amount, it may turn out to be a hefty penalty.
In addition to this, one will have to pay another fine for the late paperwork submission. For each month past the original tax deadline, the IRS assesses a fee of 5% interest on the unpaid tax.
A comprehensive solution to the problem of filing declarations for crypto investors
After the IRS and the U.S. Congress began to tighten control over cryptocurrency taxes, they realized an urgent need for a comprehensive tool that would help cryptocurrency investors remain compliant.
There are several companies ready to solve such problems, however, in any business, a human approach is important. Such an individual approach to each cryptocurrency investor is provided by ZenLedger, a SAAS company providing advanced tax software in the field of cryptocurrencies.
ZenLedger’s premise is very simple: “It’s hard to pay taxes, but we make it easy.” The company helps individual cryptocurrency investors sort out their cryptocurrency income and capital gains for filing tax returns. The problem is that traders make many transactions across and between numerous different exchanges, which makes it extremely difficult to keep records with tracking growth and loss of capital. ZenLedger helps eliminate the confusion.With ZenLedger the payment of taxes on income from cryptocurrencies becomes simple and stress-free.
Pat Larsen, the CEO and co-founder of ZenLedger, was one of the first to see major changes in the world of finance and technology and the opportunities that came with them. A graduate of the U.S. Air Force Academy, he commanded search & rescue and combat medical evacuation missions on two combat tours in Iraq as a mission commander for the U.S. Navy. After completing his service, Pat received a master of business administration (MBA) degree from the University of Chicago Booth School of Business, after which he started careers first as a manager at Amazon and later as an investment banker in M&A.
In 2017, he founded ZenLedger with partners, aiming to create the world’s leading tax and accounting software for investments, trades, and other operations involving cryptocurrencies. Since then, ZenLedger has helped thousands of cryptocurrency investors and accountants with tax filings and financial analysis, allowing them to significantly reduce cost, stress, and time during tax season.
More recently, in October 2019, ZenLedger announced it had raised $ 3.4 million in funding from institutional investors Vestigo Ventures, Gumi Cryptos, Castle Island Ventures, and Migration Capital.
“What makes ZenLedger stand out from other cryptocurrency tax software companies?”, says Pat Larsen. “You will not be left alone with your difficult situation when you need human support. Last tax season we worked 24/7 to provide the best customer support for our clients. Newly raised funds will allow us to invest even more in customer service. We now have certified CPAs in our customer support team and we just doubled the number of customer support managers to continue providing hero-class customer service to our clients.”
ZenLedger cryptocurrency tax market forecasts
According to Pat, in the near future, the IRS will be equipped with might and main — there will be more enforcement of tax laws, and we will see US based exchanges report more financial information to regulators. Globally, we will soon see the development of this trend in Japan, Singapore, Switzerland and other countries.
Countries generally want to monitor trading and investment activity, so you shouldn’t be suprised by this. However, you will also see more use of cryptocurrency, and so more everyday people will be using crypto. This will obviously be a good thing.
Is it possible to save money on crypto taxes?Pat believes it is; “You can and should save on taxes in this area — but they need to be calculated correctly. ZenLedger helps to optimize the total amount of taxes — the software analyzes the client’s transactions in several ways to eventually find the most profitable indicator of capital gain or loss.
“We have a tax loss harvesting report that can tell you exactly which coins to sell for maximum tax benefit so you can save cash and report lower gains. You can then reinvest this cash as you like to grow your investment portfolio.
Asked what advice he could give cryptocurrency investors in order to stay compliant, Pat replies: “I would recommend everyone to keep current and accurate records of their transactions. Every two or three months, you should update your transaction records.”
However, if the goal is to do everything in the best possible way, then ZenLedger solution is created just for this case. After all, time and energy are irreplaceable resources. With ZenLedger, avoiding fines is simply one of a myriad of ways to save on annual crypto taxes.