What Should You Know About Blockchain Before Tax Season?

November 9th, 2018

By now, you’ve certainly heard of blockchain, but you might not know much about it. The technology behind Bitcoin has largely stayed in the background of the digital currency, but lately, it’s started a renaissance of its own.

As Seattle accounting recruiters, the Accountingpros Recruiting + Staffing team is fascinated by blockchain. To be honest, it probably won’t have an impact on the 2019 tax season, as it’s still on the cusp, but that doesn’t mean you shouldn’t learn the basics. Here’s a few things accounting professionals should know about this game-changing technology.

How Blockchain Works

A ledger of data reproduced across computers joined through a shared network, blockchain stores information. Cryptography is used to communicate inside the network, creating a secure record of who is sending and receiving data. When one person wants to add data to the shared ledger, other users must verify the accuracy of the information before it is added to the block.

Each block on the chain has unique hash of the preceding block, effectively linking them all together. Blockchain technology abolishes the need for centralization through a shared liaison, allowing everyone involved to share data in a secure manner within the group.

Blockchain and Taxes

The impact blockchain will have on taxes remains to be seen, but Forbes suggested it could allow taxpayers to have more say in where their money goes. The security and complexity of blockchain allows it to handle multiple transaction types. While a certain percentage of each tax return funds toward mandatory spending — i.e., social security, healthcare, veteran’s benefits, transportation, and food and agriculture — blockchain could make it possible for people to choose their own allocations for discretionary spending.

Granting individual taxpayers permission to select their own allocations for discretionary spending could allow people to feel like their contributions are more meaningful, noted Forbes. This might also offer a better glimpse of shared priorities, as programs with the most contributions are clearly the highest priority to taxpayers.

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