Cash App partners TaxBit to streamline tax reporting

Through this partnership, TaxBit will be able to help Cash App provide the necessary crypto tax forms to the millions of Cash App users who have bought or held Bitcoin since 2019. TaxBit’s software solution helps users navigate the complexities of crypto tax compliance and reporting. Furthermore, company can help taxpayers understand their capital gains and losses by providing the necessary Form 8949 for free. 

The TaxBit network was launched in 2021, and according to prnewswire.com, it has saved individual cryptocurrency users tens of millions of dollars in tax preparation fees. Moreover, the network has generated more than 30 million tax forms. 

TaxBit also focuses on accounting, and in 2023, it announced the acquisition of digital asset accounting startup, Tactic. The acquisition helped TaxBit in its efforts to create a streamlined accounting sub-ledger that can save businesses hundreds of hours in digital asset management and reporting. TaxBit works with some of the industry’s top exchanges, institutional investors, governments, and individuals. The company holds SOC 1, Type 1, SOC 2, and Type 2 attestation and is ISO 27001 certified.

TaxBit’s crypto tax guide 

TaxBit offers a crypto tax guide produced by cryptocurrency tax attorneys and blockchain CPAs that aims to inform users on how cryptocurrency is taxed in the US, and to help them determine their crypto gains and losses. According to TaxBit, the IRS started asking taxpayers about their virtual currency activity on their tax returns in 2019. In 2023, the question appears on the front of Form 1040 and asks taxpayers if, at any time during the current tax year, did they receive, sell, exchange, or dispose of any financial interest in any virtual currency. 

Cryptocurrency fits within what the IRS calls virtual currency, and virtual currency is treated as property for tax purposes. More specifically, the IRS sees cryptocurrency as ‘a digital representation of value that functions as a medium of exchange, a unit of account, and a store of value other than a representation of the United States dollar or a foreign currency.’ 

This definition includes most crypto assets but doesn’t include non-fungible tokens (NFTs). NFTs generally don’t function as money or a store of value such as other cryptocurrencies.  TaxBit clarifies that, although NFTs aren’t virtual currency, they’re likely to be treated as property for tax purposes even though the IRS hasn’t explicitly mentioned this.