According to Benson, 2019 will be the first year that the IRS will explicitly ask taxpayers to document their virtual currency activity, prioritizing this question to the top of its new IRS Form 1040 Schedule 1.
Just in time for the 2019 tax season, cryptocurrency accounting firm Lukka announced a “do-it-yourself” crypto tax preparation product tailored for retail investors. Known as LukkaTax, the product evolved from LibraTax, a commercial crypto tax calculator Lukka released in 2014 when the company was first formed.
While Lukka has primarily been focused on providing institutional-grade solutions to crypto funds, fund administrators and enterprises, the company is now catering to retail investors who must specify to the IRS their transactions in virtual currencies.
Lukka CEO, Jake Benson, told Cointelegraph:
“This year we are focused on the retail investor because for the first time in six years, the IRS has clarified for taxpayers how they want to treat cryptocurrency. There is a new question that appears first on the IRS schedule 1 tax form that asks, ‘do you have any transactions in virtual currencies for this year?’”
“Six years ago, taxpayers had to report gains and losses for any asset, but this has largely been avoided, as it was never explicitly stated. This year, the question is specifically mentioned first on a major tax form”, explained Benson.
A solution for taxpayers and CPA’s
Recent statistics show that 14.4% of Americans own cryptocurrency. This means that millions of Americans will be responsible for reporting crypto on their tax forms this year.
That being said, LukkaTax will be available on Jan. 15th to support the 2019 tax season, as well as prior tax years. Like other “do-it-yourself” software solutions (think TurboTax, but for crypto), Lukka charges $19.95 for an annual subscription and $9.95 for customers who pre-purchase before January.
According to Benson, LukkaTax is a standalone product that leverages the same infrastructure as Lukka’s leading institutional solutions. The tool works in three steps. Users first load their crypto transactions into the platform. These transactions are then calculated, and a report is generated showing how much in taxes investors will pay.
While Investors can use the product together with other traditional solutions like TurboTax, Benson noted that there are two versions of the LukkaTax product — one for individuals and another for certified public accountants.
“According to CPA.com, 45% of Americans do taxes themselves, while 55% go to a tax practitioner for help. This is great for CPA’s that don’t know the crypto industry at all”, said Benson.
Benson also mentioned that on Dec. 9 Lukka formed a partnership with CPA.com, one of the largest accounting firms in America. This partnership is beneficial as LukkaTax will now be a preferred tool that CPA.com clients will utilize.
“CPA.com only selects a small number of software companies to partner with. This is a big honor for us since it will give a vast number of CPA’s across the nation direct access to our tool. Now, forty-five thousand accounting firms will have access to LukkaTax”, said Benson.
Not the end for intuitions
While LukkaTax is a tool for retail investors, Benson specified that the company is still very much focused on institutions:
“This is the first time we are doing anything with retail investors, since this is the year that recent tax compliance announcements have been made regarding cryptocurrencies. While the CPA.com partnership brings us heavily into the retail space, we still have some great partnerships with institutions. We are just now expanding into both the retail and institutional side.”
Benson also said that there have been talks with major exchanges to partner with Lukka in the future.
“We already partner with major players like Kraken, Circle and ShapeShift and we are in discussions with others as well.”