LibraTax has launched its income tax software, specialized for transactions in digital currency. In its announcement, Bitcoin and XRP are listed as examples. It is marketed to consumers and small businesses.
The software is among the first of its kind for income tax and seeks compliance with IRS rules treating digital currency as property. In May, Avalara added Bitcoin as a currency to its sales tax software.
It should be noted that the IRS does have guidelines for its approval for tax software. It is unknown if this process was followed.
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The company indicates that one of the major value-adds is the automated retrieval of transaction data from the blockchain. Also retrieved are the fiat-based exchange rates, or “fair value”, at their time of transaction. Various taxable events are accounted for including “income, gifts and donations” (although gifts are not taxable).
Capital gains/losses are also automatically calculated, although such data is likely to be stored in an exchange, not the blockchain. Said CEO Jake Benson:
“Our primary objective is to have approachable, convenient software that simplifies the end-user experience associated with taxpaying—ultimately saving users precious time and money. We’ve accomplished that without a doubt.”
There are multiple options for accounting methods (e.g. FIFO, LIFO, AVCO, or “optimized”). With the software, customers will be able to amend their existing 2013 returns if room for optimization and reduced taxes is discovered.