Vera Tzoneva, chief operating officer of CoinTracker, claims that the majority of American cryptocurrency investors are unaware that they are required to submit taxes on their digital asset activity. In an interview with TheStreet Roundtable, she indicated that just 25% of cryptocurrency investors in the United States are now tax compliant, according to an IRS-reported criteria.
Most people aren’t even aware that they need to submit their cryptocurrency taxes. I believe there is a significant awareness problem. She emphasized that terrible actors aren’t the major issue.
“It’s not because people aren’t trying to comply with the law or avoid paying taxes, the reality is, that group is still very small.”
The goal of new 1099s is to close the gap
Tzoneva anticipates a significant change in perception once the new reporting regulations take effect. The IRS is mandating brokers to provide a 1099 form for the first time, so next year will be a significant year when they have to recognize they have to be tax compliant, she added.
All cryptocurrency and traditional exchanges that facilitate trading in cryptocurrencies will begin issuing such document to its end users for the first time next year. There will be a rise from 25% to nearly 100% awareness.
She attributed the move to the 2021 infrastructure bill and associated agency rulemaking: Congress enacted the law, but it took many years for the Treasury and the IRS to draft the real regulations mandating these exchanges to issue these forms beginning next year.
What triggers taxes
Tzoneva stated that when people realize they have to pay taxes, the first thing they do is stress out. She pointed out that cryptocurrency tax responsibility exists in more areas than most people realize.
Capital gains apply when selling at a profit, although taxable events can also occur when assets are swapped.
She said that “if you acquire Bitcoin and then transfer to Ethereum, it is a taxable event. Manual reporting soon becomes impractical since active investors might have hundreds of thousands of trades, and we have clients with millions. You need software to compute all of this, which is what we’ve created.”
To move ahead, take three steps
For overwhelmed investors, Tzoneva provided easy points to start. In order to “get ahead of it,” she suggested that users use software as soon as possible and be aware that new reporting regulations are on the horizon.
According to her, after they’ve had their “freak out moment,” they should add all of their wallets and exchanges so CoinTracker can determine their obligations and give them piece of mind.
Beyond compliance, Tzoneva pointed out that taxes may be utilized strategically — regular traders can employ tax-loss harvesting to get greater tax benefits and make smarter trading decisions.
CoinTracker also supports businesses that handle cryptocurrency. If you’re attempting to handle accounting and bookkeeping because you have cryptocurrency on your books — which is a rapidly increasing field, particularly due to stablecoins — you’d utilize CoinTracker to close your books on a monthly basis, she explained.
Global regulations differ
Compliance requirements are global. The United States is one jurisdiction. The Netherlands is another. She cited Singapore as an example of a country that does not allow capital gains on cryptocurrency exchanges.
Despite this, the infrastructure is consistent: the system ingests exchanges and wallets, reconciles activities on-chain, and then “on top you have to layer in the accounting rules that vary,” which are backed by CPAs to keep regulations “up to date.”
Her advice: start early. “You don’t want the day before taxes are due to then have to figure this problem out better to start even now.”
