Tax Compliance Firm TaxBit Raises $5M to Improve Crypto Tax Reporting
TaxBit, a crypto-oriented tax compliance firm, has raised $5 million in a seed round that saw participation from the Winklevoss twins’ family office, Winklevoss Capital.
In a Jan. 6 announcement, TaxBit said that it plans to use the raised funds to enhance its software products on an international scale as its tax reporting tool has amassed thousands of everyday crypto users so far. Specifically, the Utah-based firm is planning to accelerate customer growth both in the U.S. and in regions like Canada, United Kingdom and Australia, TaxBit noted.
TaxBit’s crypto tax reporting tool is backed by a team of CPAs, tax attorneys and software devs
Launched in January 2019, TaxBit’s "TurboTax of crypto” is a product that automates cryptocurrency taxes for crypto users, exchanges and merchants. Contacted by Cointelegraph, TaxBit’s CEO and founder Austin Woodward noted that a unique feature of the platform is that it was designed by a team of certified public accountants (CPAs) and tax attorneys working alongside software developers, unlike most competitors, which he identified as being primarily developer-driven.
Woodward explained that such a combination of industry experts allows the firm to create the “most accurate tax solution on the market” and enables full tax reporting process without the need of additional CPAs. The executive wrote in an email to Cointelegraph:
“TaxBit provides a full transaction by transaction audit trail that any CPA or IRS investigator in the event of an audit can easily verify the accuracy of a users' tax calculations. Additionally, because we have certified accountants and attorneys on staff, we can facilitate any IRS crypto audits from start to finish, meaning we draft all of the IRS letters and correspondences so users don't have to hire a CPA or attorney to do so.”
Focusing on immutability of tax records and keeping up with the IRS
According to the TaxBit’s website, the firm’s tax reporting solution supports over 2,500 cryptocurrencies and includes features like API integrations and tax optimization tools. Asked by Cointelegraph whether TaxBit supports any specific cryptocurrencies, Woodward replied that the platform supports “any coin that is available on an exchange or wallet trading platform.” The executive added that the firm has been able to keep up with the IRS’ new guidance and support all coins at the same time.
One of the TaxBit’s key features, immutable audit trail, intends to address a major challenge posed by the Internal Revenue Service frequent updating the crypto tax rules, which requires accounting systems to make changes to their tax rules, Woodward said. The TaxBit CEO noted that the firm is “constantly evaluating the best and newest technologies” including blockchain technology in order to provide immutable, point-in-time and accurate tax reporting.
Dragonfly Capital is among participated investors
Meanwhile, other investors in the round included Dragonfly Capital Partners, TTV Capital, Collaborative Fund, Valar Ventures, Global Founders Capital, Table Management, and Album VC, among others. According to the firm, the funding demonstrates the shift of how Americans are looking at cryptocurrency when it comes to taxes and regulations.
The IRS released its guidelines for crypto-based tax reporting in October 2019, requiring roughly 150 million American taxpayers to answer the question whether they received, sold, sent or exchanged any virtual currency. According to some estimations, at least 12 million tax returns should contain some form of crypto investment.