Sovos integrates digital asset tax information reporting and unclaimed property compliance solutions with Prime Trust
Global tax software leader Sovos has integrated its cryptocurrency tax information reporting and unclaimed property compliance solutions with Prime Trust.
As a one-stop-shop for financial infrastructure, Prime Trust enables fintechs across crypto exchanges, NFTs, digital wallets, ATS, RIAs, broker dealers, banks and neobanks to innovate quickly and scale securely.
With the rapid growth of the digital asset market and increased compliance measures, Prime Trust needed a reporting solution that could accommodate user growth and expand information reporting demands. The company will also leverage Sovos technology to automate 1099 forms and filings, eliminating potential errors and delivering automatic regulatory updates to help customers navigate the ever-changing cryptocurrency compliance landscape.
With more than USD1.5 billion in monthly transactions processed, compliance is at the core of the organisation. Prime Trust prioritised digital asset tax information reporting as critical to scalability in a market where regulations are still evolving and tech is outpacing compliance. The company selected Sovos for its experience as the largest private filer to the IRS of 10-series tax forms and as a leader in unclaimed property compliance for both traditional and virtual currency assets.
“Covid has accelerated the world’s migration online, and the crypto market has experienced a huge boom. With Sovos, we can react quickly to shifting cryptocurrency tax reporting regulations, ensuring that Prime Trust customers are as safeguarded as investors of other asset classes,” says Stephen Cheng, chief compliance officer and BSA AML officer at Prime Trust. “Creating a secure financial ecosystem for our customers so they can protect the investors they serve is another example of how Prime Trust continues to set itself apart in the fintech industry.”
Wendy Walker, solution principal at Sovos, says: “Since 2014, investors have demanded more clarification from the IRS on the cryptocurrency income that should be reported to the agency. And while many, including members of Congress, have looked to the IRS to provide more guidance on crypto tax reporting, virtual asset service providers and their customers have instead been met with a threat of enforcement.”
In July 2019 and again in late 2020, the IRS sent three different letters to thousands of cryptocurrency investors reminding them of their income tax obligations, indicating investors may have inaccurately reported their gains or losses associated with virtual currency transactions. The agency threatened penalties for failing to report income and pay related taxes. In 2019, after five years of anticipation, the IRS released some guidance in Revenue Ruling 2019-24 and the related updates to the online cryptocurrency FAQs with more guidance for individuals, but the agency did not specify which 1099 forms crypto trading exchanges and neo banks should use to report tax information to the IRS and to their customers.
“As 1099 cryptocurrency tax reporting and unclaimed property compliance continue to take shape, Sovos remains at the forefront of regulatory changes and can quickly adapt to rapid reporting requirement shifts,” says Paul Banker, general manager of Tax and Regulatory Reporting at Sovos. “Not only will Prime Trust mitigate IRS penalty risk for its customers by collaborating with Sovos, but the company is also preparing for any changes that come from the IRS, while many of its competitors scramble to make sense of their compliance obligations.”
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