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Ernst & Young Launches EY CryptoPrep To Help Clients Auto-calculate Crypto Tax

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The big four accounting services firm Ernst & Young LLP or EY, has launched a cryptocurrency tax application called 'EY CryptoPrep' to assist its clients with U.S. tax filings related to their cryptocurrency transactions. The application modernizes and automates the crypto tax accounting process.

The launch comes just ahead of the tax filing deadline as the U.S. Internal Revenue Service (IRS) gets cracking on non-compliance in cryptocurrency tax.

The IRS continues to warn taxpayers, who do not properly report virtual currency transactions, that they will be liable for tax, penalties and interest and in some cases they could be subject to criminal prosecution.

The new Software as a Service (SaaS), web-based product is a fully automated, enterprise-grade crypto tax engine offering step-by-step guidance through the crypto tax process. It helps individuals calculate tax-related gain or loss from crypto transactions.

EY CryptoPrep will request basic information to calculate the clients taxable gain or loss on crypto transactions across all major exchanges, without complication or jargon. It supports many major cryptocurrency coins and exchanges.

The application helps in importing all transactions of a particular individual from across all exchanges. Any other additional off-exchange transactions can then be added to it and the draft 8949 tax form can be downloaded. It also allows for downloading of draft IRS 8949 forms for current and past years.

It applies appropriate tax rules to deliver a detailed account of cryptocurrency capital gains or losses and completes Form 8949 for all applicable tax years after aggregating and reconciling transaction data. It even enables users to submit amended returns for prior years to reconcile previous tax liabilities.

EY CryptoPrep uses the same methodology that EY uses for commercial clients and is based on the latest guidance from the IRS.

In March 2019, EY had launched a similar tool called EY Crypto-Asset Accounting and Tax (CAAT) to serve its institutional and commercial clients in the U.S. for calculating the tax payable on cryptocurrency holdings and transactions executed by them.

IRS treats virtual currency as a commodity or property, and not as real currency, for federal tax purposes. Therefore, virtual currencies are also subject to capital gains laws.

The current guidance for taxpayers is to file each and every transaction executed using a cryptocurrency. And the IRS has increased enforcement activities against taxpayers who "misreport" their cryptocurrency transactions.

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