It has always been an open secret to the Crypto community that Crypto taxation is coming. Lawmakers and policymakers have for long been proposing a taxation mechanism to regulate Digital Tokens and to ensure that the government has control over the nascent industry.
For this regard, one of the big 4 accounting firms Ernst & Young (EY) has deployed EY Blockchain Analyzer. This is an analytics tool that has been designed for handing Crypto taxation.
EY made this announcement during its annual Global Blockchain Summit. The firm reveals that it has spent millions of dollars in the last two years to upgrade its first generation Blockchain Analyzer to a second generation.
EY Is Set To Be A Crypto Tax Services Leader
The audit firm is aiming to be the best Crypto tax services firm by investing capital in deploying a second generation Blockchain Analyzer system. The tax tool is already available for EY teams who are due to help their 2019 clients in Crypto markets and Blockchain industry to be tax compliant.
A Blockchain officer at EY, Paul Brody, says that the company will use the new Blockchain Analyzer for transaction monitoring, tax, and audit.
EY Blockchain Analyzer Is Interoperable On Other Platforms
The EY Blockchain Analyzer will be focusing on calculating capital gains and losses that Cryptocurrency investors incur on their Cryptocurrency transactions.
Since Blockchain platforms have privacy and anonymity features, the audit DLT platform will use the zero-knowledge proof mechanism to analyze private transactions. The infrastructure is interoperable on Ethereum, Litecoin, Bitcoin, Ethereum Classic, and Bitcoin Cash public Blockchains. Further, the EY personal can access data on Hyperledger, Quorum, and private Ethereum Blockchains.
EY Already Has A Tax Tool For Its Crypto Clients
This is not the first time that the company adopts a Blockchain platform for Crypto tax purposes. In March 2019, EY deployed the CAAT (Crypto-Asset Accounting and Tax) program that has been designed to help crypto investors to compile IRS tax return reports.
The EY CAAT is also interoperable and can be used to source data from multiple exchange platforms such as Binance, Huobi, etc. The data that the platform collects is then consolidated and used to automatically produce dashboards and reports for IRS tax returns preparation.
Meanwhile, Congressmen Want IRS To Clarify Crypto Tax Rules
The meteoric growth of the Crypto industry has caught IRS off-guard which has left many Digital Asset investors to wonder whether they are required by law to pay capital gains taxes. The US lawmakers are hence urging on the IRS to offer clear guidelines on Crypto taxes to clear the air on the matter. In September last year, they called on the Internal Revenue Service to update guidelines on Crypto investments capital gains reporting, in a reprimanding letter.
How Crypto Taxes Are Computed
Investors are required to report gains only after; selling Crypto, converting Crypto to Fiat, used Crypto to settle payments, or after being allocated free Tokens on an airdrop or fork. However, Crypto holding and giving Crypto gifts worth less than $15,000 to relatives is tax exempt.
Meanwhile a renown Bitcoin enthusiast, John McAfee has said that “taxation is theft” which is reminiscent of the “British colonial” oppression that the New World fought fiercely. He has since vowed not to pay any tax.