Can EY CAAT Help With Cryptocurrency Reporting, Compliance & Tax Accounting?
3 years ago when I switched to cryptocurrencies full-time one of the biggest issues I was looking at was the accounting for taxes part. But fortunately it wasn't as big a deal as I thought it would be.
There isn't a legal requirement to disclose cryptocurrency holdings and any withdrawals made to your bank can be easily accounted and taxed which sort of simplifies the problem.
But for many users across the world where governments are far more stricter such as USA it's easier if one had some kind of cryptocurrency reporting software which would manage all this for you.
Tax accounting around cryptocurrencies are not the easiest due to how many trades occur in a month. Someone might be trading hundreds of times in a month let alone in a year. Therefore EY has come up with a solution for US citizens to make the process of tax accounting and tax calculations easier.
Ernst & Young LLP today announced the launch of the EY Crypto-Asset Accounting and Tax (CAAT) tool, a technology solution that facilitates accounting and tax calculations for cryptocurrency transactions. The US rollout is part of the EY strategy to lead the industry with blockchain-related capabilities and services worldwide.
"EY CAAT exemplifies our commitment to exceptional client service in a changing landscape," said Marna Ricker, EY Americas Vice Chair of Tax Services. "We are excited to offer an innovative technology specifically to address our clients' needs in the crypto-asset space. I appreciate the efforts of the EY Foundry and professionals across our practice who have made this breakthrough."
EY CAAT according to their press release will be used by institutional clients with cryptocurrency or digital assets on their balance sheet. But it isn't limited to these institutional users as even smaller institutional clients or individual users trading much smaller amount of cryptos can use and benefit from their software.
However, it isn't being rolled out for use for everyone currently. While EY hasn't specified the timeframe I reckon maybe a year down individual users might get access to this accounting tool as they prioritise their institutional clients or clients with whom EY has regular crypto dealings with.
The software is able to get transaction-level data from top exchanges and automate generation of reports that are IRS compliant. It can help prepare IRS tax returns related to cryptocurrencies.
Blockchain & cryptocurrency space is dynamic and fast evolving. There are clients across various industries, especially asset management firms who can benefit from this tech.
From a retail client perspective, the product will be leveraged for high net worth individuals served by the EY Private Client Services practice and made available to users of EY TaxChat, a mobile tax preparation service that pairs users with licensed and experienced EY professionals who prepare individual tax returns.
"The world of crypto-assets and cryptocurrency investing continues to evolve. It is the Foundry's mission to stay ahead of the market as best that we can and to launch new digital solutions and digital businesses to help our clients do the same. EY CAAT is a timely addition to our expanding portfolio of successful new digital businesses at the Foundry," said Chirag Patel, EY Foundry Leader.
If your country has specific tax laws around cryptocurrencies and you have to make a major, sincere effort to do your books of accounts every year then a software tech like this makes lives so much easier. Imagine getting your accountant to do all this and wasting their time and your money.
It's a trader's nightmare auditing purchase and sale prices and calculating profits or losses and accounting for taxes. If a software can solve it then why not use it?
But, EY doesn't mention anywhere in their release about the cost of using this software. I'm hoping they come up with further details and when individual users from US can use it.
All things considered I think it's a good move and I'm hopeful that there will be many more such solutions emerging in all major economies of the world down the road, making it easier for anyone to opt-into cryptocurrencies and use them over FIAT.
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Excellent information - but I am opposed to taxes in the crypto industry at the moment. I think many will disagree with me, but I do not pay taxes and now I am not going to do that. I pay a commission on the stock exchange, I pay a commission for transfers - this is my tax. Pay tax to those who did nothing for crypto - I think is wrong. But this is just my personal opinion!
That's a fair point. I would prefer cryptos are not taxed myself. Hoping our regulations aren't too strict when they come in to effect in India. Government won't stop itself from interfering in everything so taxes seem inevitable to me.
As they say in Russia / we will live - we will see / I understand that they want to take everything under control, but this contradicts the main principles of Crypto - I will not give up so quickly - I will carry this flag to the end. 😎✌️
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I like your spirit :D
So how do you file your taxes, is it 30% flat of whatever you earn or you pay tax only based on the tax bracket you are in.
If you are in India you can follow this guide I wrote for TheQuint here and it should shed some light on how to proceed but do check with your auditor for changes in the tax structure. I will probably run an update to this piece in April or May 2019. :)
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If it's being counted as Income from other sources and the source is not counted in speculation it's being charge at normal slab but at this time even CAs also don't have a clear look on income from ctyptocurrencies.
Or loss on crypto currencies... ;)
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