Crypto Tax Compliance Tool TaxBit Raises $5 Million
Of all the regulatory issues that cryptocurrencies have presented, perhaps the most tangible involves taxes. Ever since the great Bitcoin boom of 2017, the Internal Revenue Service (IRS) and tax professionals across the country have attempted to get the word out about properly reporting crypto gains — while likely trying to understand the rules for themselves. Luckily the startup TaxBit has a plan to help with this pain point and has just raised $5 million to fuel that plan.
Often referred to as the “TurboTax of crypto,” the Utah-based TaxBit officially launched just one year ago and offers tax automation software specifically geared toward cryptocurrency users. This week they announced the completion of a seed funding round that includes investments from TTV Capital, Dragonfly Capital Partners, Collaborative Fund, Winklevoss Capital, Valar Ventures, Global Founders Capital, Table Management, and Album VC — with the lattermost previously participating a pre-seed round as well. According to TaxBit the funds will be used to not only grow its userbase at home in the United States but also expand abroad, with the United Kingdom, Canada, and Australia all mentioned as potential new markets.
As TaxBit notes, the IRS has started to crack down on those skirting cryptocurrency gains disclosure rules. This includes sending warning letters to some 10,000 taxpayers last summer and threatening criminal tax indictments. At the time some argued that the IRS had failed to provide detailed guidelines in regards to reporting crypto but the agency has since issued new guidance on the matter.
In a press release revealing the investment round, TaxBit founder and CEO Austin Woodward said of his company, “In such a highly regulated space with so many complexities, TaxBit is needed to remove the burden of proper cryptocurrency tax reporting from the shoulders of crypto users, exchanges, and merchants. Woodward added, “TaxBit’s software and tax experts will accurately handle all of the back-end complexities, while providing users with an intuitive, user-friendly experience on the front-end.” Speaking to TTV Capital’s decision to invest in TaxBit, the firm’s partner Sean Banks stated, “For cryptocurrency to proliferate further, an ecosystem of compliance tools must be created. We are very impressed with the TaxBit team and the platform they are building. This technology is fundamental to the adoption of cryptocurrency, as it enables the industry to progress while being compliant with tax regulations worldwide.”
Although 2019 wasn’t exactly a banner year for cryptocurrencies, there’s no doubt that there is still interest and belief in the promise these assets offer. Of course, while part of appeal among hardcore enthusiasts is the decentralized and some would say lawless nature of crypto, regulation is a real issue that can affect users — as evidenced by the IRS’s pursuance of certain taxpayers. Therefore it does seem that a program such as TaxBit is needed in today’s world and could even be a benefit to professional tax preparers who are still getting up to speed on cryptocurrency compliance. As a result it’s fairly safe to say we’ll be hearing more about TaxBit in the months ahead.