Not everyone is an expert when it comes to calculating crypto taxes. Seen as one of the more stressful parts of being a cryptocurrency trader, the time spent in reporting your crypto taxes largely depends on the number of coins you own, the trades you’ve done and how many exchange platforms you trade on.
The complexities don’t end there as each exchange platform uses its own method for tracking your crypto trades. Without the use of a crypto tax software, each trade you make needs to be individually added and recorded, creating a time-consuming process and a margin for error.
They can aid in the process of filing your yearly taxes and is much more affordable than bearing the brunt of expenses for obtaining the services of Certified Public Accountants (CPA).
As governments try to grasp the impending change towards the normalization of cryptocurrency, a vast number of crypto tax softwares are now growing in demand. The Internal Revenue Service (IRS) has put new crypto tax laws in place to assist taxpayers who carry out transactions in Bitcoins and other virtual currency.
Coinbase, a popular cryptocurrency exchange was ordered by the IRS in 2016 to hand over all transaction-related data and information on more than 14,000 of its customers. Containing all crypto details of customers such as purchasing, selling, sending or receiving more than $20,000 worth of Bitcoins between the years 2013 to 2015.
In February 2018, Coinbase disclosed that it had notified approximately 13,000 customers with regard to their information being given to the IRS about their crypto activities. This has led to more and more people adopting crypto tax software to make sure they don’t overpay their taxes and to avoid trouble with the IRS.
These softwares are highly recommended for people who are not professionals nor certified public accountants or just about anyone who is having a tough time filling their crypto taxes. Depending on the software you choose, there will be additional tools and features available to you, let’s get started.
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The Best Crypto Tax Softwares
Known for its handy feature that automatically imports all your crypto trades and transactions, thereby removing the hassle of maintaining your crypto portfolio manually. Seen more like a simple tool, CoinTracking analyzes all your prior trades and generates information in real-time such as profits or losses, the value of your coins and unrealized gains, etc. It supports more than 4,000 digital currencies and coins such as Bitcoin, Ethereum, etc. on over 70 major crypto exchanges.
It can also offer you a detailed summary of the values displayed in fiat currency if required. Along with a statistical chart viewing system that includes the value per currency, balance sheet history, and management of portfolio distribution. CoinTracking is a free-to-use mobile application available on Android and iOS.
Deemed as one of the easiest ways to report your cryptocurrency capital gains and income taxes and rated by Forbes as one of the best platforms for filing crypto taxes. TokenTax is the only crypto tax platform that supports every major exchange.
Through their direct connections with these exchanges, they can automatically import data on all your trades. However, if you use an exchange platform that does not support data imports, you need to upload a file containing your trading history and data onto their software.
Praised for its simple interface, Zenedger is integrated with all leading exchanges and supports all major crypto exchanges and fiat currencies.
Your transaction history is imported from the supported exchanges into the software interface and your tax documents are filled in automatically. These documents pertain to your capital gains, income, donation and closing reports. Along with profit or loss statements for you and your CPA.
All documents generated from ZenLedger are 100% IRS-friendly, which means that they can go straight from the software into your tax returns without any issues.
ZenLedger has three pricing options, ranging from $99 to $299 per year. For the price, everything from exchange support, tax reports, and access for your CPA are featured. The main difference is the number of transactions allowed by the package, which range from 100 transactions to unlimited.
This software allows cryptocurrency traders to calculate capital gains or losses in a breeze. Supporting over 20 direct connections to crypto exchanges like Coinbase, Bittrex, Gemini, Binance, etc. In case the user is from an unsupported exchange, they can upload their trading data using CryptoTrader’s generic exchange template.
After your trades have been imported, CryptoTrader will calculate your tax liability using the same ‘first-in-first-out’ (FIFO) method used by CPAs and across the industry. Users are provided with exportable tax documents for filing (including IRS Form 8949) your cryptocurrency income, once your taxes have been calculated.
A stand out feature of CryptoTrader is its audit trail. This details every single calculation used in your tax filing report to get your proceeds and net cost basis. The audit trail report will include short and long term sales, closing positions, total income, etc.
It is a crypto tax reporting software and also a hybrid crypto-asset tracker. The software will automatically sync your transactions and asset balances from the crypto exchanges you use or from your digital wallet and maintain up to date information on your crypto activities.
CoinTracker also provides a tool called performance tracker that tracks your investments. This will give you a better picture of how your crypto investment is performing over time. Some of the other features include cost basis reports, capital gains, auto-synchronization with exchanges and wallets and tools like TurboTax that allow access to your Coinbase account from within the software.