PayPal’s decision last week to embrace crypto may help with mainstream adoption, but it could also mean additional tax work for users unfamiliar with the crypto landscape.

Over the next few weeks PayPal will be rolling out buy, sell and hold features for cryptocurrencies on its platform to U.S. users, but the service will not allow users to withdraw or deposit holdings. 

According to Internal Revenue Service rules, cryptocurrencies like bitcoin (BTC) are treated like property; therefore, each time someone buys, sells or exchanges a digital asset it is considered a taxable event wherein the capital gains tax applies. 

Under PayPal’s plans to make cryptocurrencies a “funding source” for purchases at its 26 million merchant customers, this will also apply to situations such as paying for a cup of coffee using BTC via PayPal, where the transaction could incur a capital gain or loss of a few cents. Because PayPal said transactions with merchants would be settled in fiat, each time the platform converts a user’s crypto to cash a tax obligation is created. 

Read more: Crypto Long & Short: Why the PayPal Rally Isn’t What It Seems, and Why That’s OK

“The accounting on this would be a huge headache,” said Stephen Turanchik, a tax attorney at law firm Paul Hastings and member of the AICPA’s virtual currency task force. He pointed out that regardless of crypto being involved, PayPal and Venmo can add a lot of accounting work because of the variety of transactions that occur on these platforms. 

Adding crypto to the mix could make it more challenging to capture all the transactions and associated capital gains or losses, especially if users mix business and personal payments on these platforms. 

According to Kirk Phillips, a certified public accountant (CPA), while PayPal may help springboard crypto adoption, the tax ripple effects are also likely to depend on how good a job it does on reporting. As a payment processor, PayPal is required to issue Form 1099-Ks to users and the IRS if an account holder’s total proceeds go over $20,000 and includes more than 200 transactions in a calendar year.

Regardless of whether they meet that requirement, all users will also be able to see their transaction history and account statements through their PayPal account.

While the forms and transaction history can be helpful, these documents may not be sufficient for tax purposes because users will also need to keep track of the base price they bought the digital asset for, how much they spent on it, how long it was held before being sold and the price for which it was sold. 

Venmo, which is heavily used for small purchases, could complicate this trail a little more. 

“We’re gonna see more and more micro purchases, and the importance of some sort of de minimis (too minor to merit consideration) exception might become greater,” said Lisa Zarlenga, co-chair of the tax group at law firm Steptoe & Johnson LLP.

Read more: PayPal’s Move Is Good for Crypto Adoption but Not So Much for Profits: Morgan Stanley

She pointed out these transactions are currently treated as capital gains or losses, no matter how small, and therefore are taxable events. 

A best practice for users might just be to focus on keeping well-maintained records of their crypto interactions, she said. 

Although PayPal’s embrace of crypto promises to bring digital assets to a mainstream base of users, the demanding tax rules may also lead to early stumbles from some of them. For now, a simple practice to start with may be to avoid using emoticons in the memo line for Venmo or PayPal transfers.

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