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Cointracker raises $100m ahead of tax season

17:24, 28 January 2022

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Tax filing concept with Form 1040, pencils and calculator
Cointracker raises $100m ahead of tax season. Photo: Capital.com

A new cryptocurrency tax compliance service raised more than $100m (£75m) in a Series A round Thursday as the 2022 US income tax filing season opens.

Cointracker, a company founded in 2017 out of San Francisco, California, secured funding from backers such as Coinbase Ventures and Y Combinator, an investment firm that help launch startups including Stripe, Airbnb and Gusto. The funding values the Cointracker at more than $1.3bn (£970m).

The round follows a $2m seed round which included investors like Reddit founder Alexis Ohanian and Gmail creator Paul Buchheit.

“CoinTracker and its investors have a shared mission of increasing the world’s financial freedom and prosperity,” Jon Lerner, CEO and co-founder of CoinTracker, said in a statement. “Our industry-defining investing partners like Accel believe in our vision and opportunity to give people more control of their wealth and taxes.”

About Cointracker

According to the company’s website, Cointracker is a digital asset management platform that enables crypto holders to track their portfolio across different exchanges and wallets. This gives investors a consolidated view of their investment performance and potential taxes owed.

Cointracker describes this service as “critical” for cryptocurrency users and “could save them thousands per year” in many cases.

The company has also partnered with popular tax filing services like Intuit’s TurboTax and popular exchanges such as OpenSea and Coinbase.

“We are incredibly excited to partner with them to make cryptocurrency portfolio tracking and tax compliance seamless, and ultimately enable and accelerate mainstream adoption of crypto,” Lerner said.

Crypto taxes

Cointracker’s funding round also comes as US regulators seek greater regulation of the crypto tax space.

This year is the first year that crypto traders will need to report their transactions in bitcoin, ethereum, dogecoin, and other cryptocurrencies to the US government.

These transactions include fees received for mining operations, airdrops, hard forks, and other kinds of compensation.

The Internal Revenue Service, which oversees US tax administration, added a line on the 2019 income tax return asking a simple yes-or-no question about an individual’s crypto holdings to the top of its tax return papers.

During that year, 928k filers said they received, sold, sent or exchanged virtual currency compared to 64 million who said they did not.

Earlier this year, the Treasury Department issued a policy brief that estimated the Us government could collect more than $700bn in revenue from cracking down on tax evasion using crypto.

The IRS opened the US tax filing season on 24 January.

Further reading

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The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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