Are You Ready To Support Cryptocurrency? Here's What You Need To Know

In July, I talked about how easy it can be to add cryptocurrency to your business with the help of NASGO, a company helping businesses, sports influencers, musicians and many others to tokenize their businesses with features for point of sale, closer communication for customers, social media, tokenized loyalty programs, and as a means of supporting humanitarian causes.

As I write, the first musical performers, for example, including Jaafar Jackson (nephew of Michael Jackson), emerging vocalist Makela and Cali Tucker, who you may recall from The Voice, are tokenizing their musical releases. Other artists are moving this direction as well, which could turn the music recording industry on its head.

These decisions seem obvious and easy. But what’s less easy, as you get more deeply involved in tokenization, are the issues of cryptocurrency and taxation. Get this: the U.S. government’s investment in blockchain analysis companies has more than tripled since early 2018. So far, that investment totals $5.7 million, with the IRS leading the way.

So you can guess where the challenge is leading. If you are transacting in cryptocurrency there are tax ramifications that you need to know. Important in this is understanding, according to NASDAQ, is the IRS’ definition of cryptocurrency. If you are tokenizing your business to provide marketing and branding benefits to your customers, you’re home free, as far as the IRS is concerned. But if you are using cryptocurrency as actual currency (investing or accepting tokens as payment) you need to report these transactions to the IRS and if you fail to do so, in the worst case could be convicted of tax evasion, charged a penalty of $250,000 and sentenced to jail.

However, a company I’ve become aware of recently, ProfitStance, is working to alleviate this concern with a SaaS-based platform built by crypto investors to answer the taxation concerns of investing—record keeping and accounting of every transaction to ensure full compliance and eliminate the work (and the potential mistakes) in tax calculations. The developers of this extensive platform have provided support for all exchanges and wallets to make it easy to track every transaction (including investment, a purchase using cryptocurrency, or moving cryptocurrency between exchanges).

Pricing for the program ranges from free, for portfolio viewing and preparation of a 1099, to basic or premier retail service for $70-$600 per year to $2,600 for an enterprise/financial services organization.

Finally, as you guide your company into crypto, here are several other tidbits you may find helpful as well. The first is The Pareto Network, a peer-to-peer financial content marketplace for the digital currency sector that connects providers of financial information in the sector with investors, giving foresight into market inefficiencies and opportunities. The Pareto token has a unique classification that can count as a tax-deductible expense. That means the cost for Pareto tokens you hold on your balance sheet as an asset can be partially recouped or sold as profit.

Finally, another good news item. If you invested in Bitcoin in 2017 and have been stung by losses this year: You can use those losses to offset other types of capital gains, with any amount over $3,000 being rolled forward to the following year. So if this deduction applies to you, be sure you remember to take it.

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