Binance.US, the US arm of the world’s largest cryptocurrency exchange by volume, has partnered with Sovos, a startup that focuses on cryptocurrency accounting and auditing, in order to modernize its tax information reporting.
Binance.US will use Sovos’ technology to automate its 1099 forms and filings, which helps reduce potential human errors and ensure automatic regulatory updates. The company’s Tax Information Reporting solution, which has experience in handling tax issue in alternative currency markets, allows Binance.US to protect its users just as investors of other asset classes.
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“The reporting obligations for cryptocurrency continue to evolve at a breakneck pace, often lacking clear guidance from regulatory authorities. By implementing Sovos, Binance.US can be assured of always having the latest changes pushed to us through an automated platform,” said Joshua Sroge, interim CFO, Binance.US.
“As the rules and regulations around cryptocurrency tax reporting remain unsettled, the Sovos regulatory team continues to be at the forefront of changes, so we can help platforms like Binance.US quickly adjust to the reporting requirements and stay compliant,” said Paul Banker, general manager of Tax and Regulatory Reporting at Sovos.
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Binance has originally entered the US market in late 2019 via a partnership with BAM Trading Services, a FinCEN-registered company, to roll out the new platform exclusively for customers based in the United States. Binance has licensed its matching engine and wallet technologies to its US partner which handles operations into compliance with local regulations.
Most recently, Binance.US has added an over-the-counter (OTC) trading portal, which allows the execution of transactions on a large variety of crypto and fiat pairs.
This collaboration with Sovos should address the reporting needs of the cryptocurrency customers in the upcoming tax season. As such, accounting professionals servicing crypto-transacting clients will have sources required when reconciling cryptocurrency balances and transactions.
Recently, there have been numerous reports emerging of tax authorities clamping down and going after cryptocurrency traders. The US Internal Revenue Service (IRS) also sent letters to taxpayers who might have failed to report income and pay the resulting tax from cryptocurrency transactions.
At the very core, the IRS still deems crypto assets to be property rather than currency for income tax purposes, the same as its regulatory guidance came out five years ago. That means the authority will continue to tax crypto profits and losses like those for stocks, at capital gains rates.