Utah tech startup, TaxBit, has announced that it has raised $5 million in its latest seed funding round to improve the performance of its innovative cryptocurrency tax platform.
According to a Deseret report today, the platform would help crypto investors in the United States to comply with the country’s tax regulations.
Participants of the funding round include Winklevoss Capital, TTV Capital, Valar Ventures, Dragonfly Capital Partners, Collaborative Fund, Global Founders Capital, Table Management, and local venture capital firm Album VC.
This is coming after the Internal Revenue Service (IRS) prompted U.S. citizens via a 1040 “long-form” last year to indicate whether or not they have conducted any crypto-related transactions, which led to either a profit or loss.
The inquiry brought several thoughts to mind as many believed that the tax agency is planning on levying taxes on crypto-related transactions in the future.
Commenting on the development, TaxBit CEO and co-founder, Austin Woodward, stated that cryptos are too popular to be ignored by relevant tax authorities as more users keep declaring interest in digital currencies.
“There’s been a misconception that crypto was untraceable and a vehicle for hiding income or evading taxes […] What the reporting requirements [for crypto transactions] are, and what you’re liable for in your filings, has been a point of confusion,” Woodward added.
According to Woodward, TaxBit is trying to eradicate this confusion with its tax solution, by integrating a user’s digital wallet or crypto exchange account to the platform, which would automate the reporting process by pulling the necessary data and completing the required tax reports on behalf of users.
Since its launch last year, it has helped crypto investors with tax obligations as well as develop enterprise products for crypto-related firms, exchanges, and merchants.
As the crypto industry gets bigger in terms of profit, countries are looking for ways to generate revenue from the sector, which had led to several nations proposing bills to tax crypto transactions.
Last month, South Korea reportedly drafted a bill to impose tax levy on profits acquired from crypto trading. However, local traders are currently exempted from paying taxes on their crypto gain as the existing tax law does not consider crypto as a taxable event.