Believe it or not, it’s time to start thinking about taxes again. It’s hard to believe we’ve already come full circle, but here we are, waiting on our tax documents so we can file. As cryptocurrency continues to gain traction in the market, it garners more attention. Unfortunately, some of that attention is from governments, so they felt it wise to step in.
Governments have shown a significant amount of interest in cryptocurrency and crypto markets. As a result, we’ve seen an increased amount of initiatives and processes put forth to properly tax cryptocurrencies and the individuals who own them. Of course, this has led to cryptocurrency tax software being developed.
Cryptocurrency taxes and regulations are still nascent, but that doesn’t stop financial authorities from determining and assigning digital currencies a tax bracket. Currently, cryptocurrencies are considered abstract properties, which puts them in that specific category while owners fill out their taxes. It’s difficult to understand the details unless you’re a CPA. And this isn’t an easy process as this guide from CPAExamGuy shows.
Get Ahead of Regulations
Not all cryptocurrencies have a person or individual publicly assigned to them, which makes it difficult for the IRS and other governing financial bodies to determine who, exactly, should pay those taxes. From 2013-2015, the IRS reports that less than one thousand Americans identified cryptocurrency on their taxes each year.
Even recently, we’ve seen prominent exchanges such as Coinbase providing governments personal data in regards to specific cryptocurrency addresses. This is a result of governments putting pressure on these exchanges. While this might appease governments in the interim, it’s only a matter of time before cryptocurrency tax regulation hits crypto investors hard.
Because of this, many people recommend that it’s wisest to start reporting cryptocurrencies now, to avoid future fines or punishments. Therefore, many online tools have been made available to help people prepare their cryptocurrency taxes. We’ve found a handful that should help you this tax season. We consider these the best cryptocurrency tax software available on the market.
Please keep in mind that the contents of this article are opinion and you shouldn’t view them as accounting, tax, legal, or investment advice.
If you’re looking for a simple way to calculate those challenging crypto taxes, look no further than BearTax. Using this platform, you can import all your crypto transactions from over 25 exchanges. The site will determine your gains and give you the documents you need to file your taxes.
You’ll discover several useful features available on the BearTax platform. For starters, the site is easy to use and navigate. The “smart matching” functionality will match deposits and withdrawals from supported exchanges and put them into a format that’s easy for you to review. This type of feature is great in that it helps you bypass negative balances, which might impact how accurate your tax report actually is.
BearTax also makes it easy for you to see your tax liabilities based on each cryptocurrency through its gain/loss feature. You have a clear view of exactly when you purchased, sold, or traded any digital assets along with their corresponding liabilities in regards to your taxes.
Additionally, the platform works with both decentralized and centralized sites. This helps to lower the difficulty that is often associated with trading on decentralized exchanges. Plus, if BearTax doesn’t have a way to integrate with a certain exchange, you can always import a .csv file.
For those that don’t want to spend a lot on their crypto taxes, BearTax offers a wide range of pricing options. Whether you choose the $0.99 package or the $199 option, you’ll be able to download the forms you need, review your gain loss summary, receive chat support, and have support for an unlimited number of exchanges.
The biggest difference between the packages is simply the number of transactions supported. The low-end supports only 20 while the upper package offers unlimited. The only thing you’re charged for is are the documents you download. Calculations are all free.
BearTax is a fantastic platform when it comes time to prepare your digital currency taxes.
Koinly is an all-in-one cryptocurrency accounting & tax software. It comes with a sleek UI and offers tax reports for the US, Australia, Canada, Sweden, Norway, Germany, Switzerland and about 20 other countries. While many tax solutions will boast hundreds of supported countries, they usually just give you a generic file with a list of your capital gains that you then need to parse and convert into the format requested by your tax agency. Koinly actually produces reports that can be submitted directly to the tax authorities, for ex. For the US it generates the Form 8949 and Schedule D in pdf format, for Sweden it generates a K4 and for Norway a Rf1159 and so on.
Koinly also offers API integrations with all major exchanges and blockchains and can sync your entire transaction history automatically. What sets it apart is that it also allows you to keep track of your entire crypto portfolio and see how it has evolved over time with advanced and beautiful graphs. While there are already portfolio tracking tools out there, Koinly differs from them by offering a platform that is specifically designed for investors that want to reduce and monitor their taxes.
At the time of writing Koinly supports 333 exchanges, 69 wallets and over 6k cryptocurrencies which easily puts it in the lead in terms of most supported platforms. Koinly even comes with an in-built blockexplorer that makes it easy to track transactions on different blockchains in one place – a handy feature if you find yourself jumping between blockexplorers a lot.
Similar to BearTax Koinly also offers a smart matching technique that will automatically match transfers between your exchange accounts and wallets, on top of this Koinly also has a superior error handling system that will warn you when it detects discrepancies in your data or when your tax report may not be accurate. Some exchanges such as Bitfinex can have ‘gaps’ in their transaction history so its useful to know that there is something wrong so you can manually go in and fix it instead of generating a faulty tax report. They also offer free crypto tax guides to help you along.
Koinly is free to start with for unlimited transactions but requires payment if you want to download tax forms. Prices start at $79 for 300 transactions and increase depending on volume. Something to note is that other solutions usually charge per tax report while Koinly charges only per year. So, if you want to amend your old tax returns as well, Koinly will definitely come out the cheapest option.
Koinly is an excellent solution for anyone who wants to track their taxes and generate instant tax reports when the time comes.
CoinTracking is considered by many as the best cryptocurrency tax software on the market. Using the CoinTracking platform means you’ll get an exact idea of how your cryptocurrency investment portfolio looks. You can determine how diversified you are and how much your investments have made throughout the year.
With CoinTracking’s web-based solution, you can connect your various exchange accounts by using their APIs or through a CSV. Through these options, CoinTracking can view your trading history throughout the year and determine your losses or profits for the calendar year. You can have the final estimates exported to XML, Excel, PDF, CSV, or JSON file types.
The site will scan all of your transactions throughout the year. You’ll be able to see every trade you made and what you sent and received. CoinTacking shows you both the historical and current coin prices of your transactions, which helps alleviate a lot of the pain of having to find that information manually.
CoinTracking Support Options
CoinTracking’s software offers support for over five thousand different currencies and can pull information from 25 different exchanges. This makes it a great asset for anyone who has done cryptocurrency trading on various platforms throughout the year. It’s also valuable if you trade in more than one coin.
If you decide to use CoinTracker, you can sign up for a free account on their site. Of course, the free version has feature limitations and the number of transactions it can handle. Using the premium version gives you 365 days of usage along with all the benefits CoinTracker offers.
Therefore, if you purchase the CoinTracker service in March of 2019, you can calculate your taxes for 2019 taxes, but everything you spend or earn until March of 2020. With CoinTracker’s full solution, you’ll get a Capital Gains Report. This is done using LOFO, HIFO, FIFO, or LIFO calculations.
CoinTracker offers its users a referral link which lets them invite others to join the platform. If you successfully recruit someone else, you can earn a discount on future purchases. The pricing for the CoinTracker solution is a little more than other solutions. However, users are paying for the ability to handle more cryptocurrencies. If you’re an advanced trader using multiple platforms, you might give CoinTracker serious consideration.
One of the more popular cryptocurrency solutions out there is the web-based BitcoinTaxes platform. BitcoinTaxes launched in 2014 and offers excellent tools for calculating your yearly cryptocurrency taxes. Users who choose BitcoinTaxes will have the ability to generate tax reports which include details of their cryptocurrency transactions throughout the year.
Part of these reports include transactions from supported exchanges like Bitstamp, Gemini, Coinbase, and other often used trading platforms. The platform also allows users to add any donations or spending that might have come from their personal crypto wallets. Additionally, BitcoinTaxes lets you import any mined currencies or income they might have received throughout the year.
Once you’ve added all your data, the BitcoinTaxes will automatically calculate your taxes along with the following:
- A donation report that shows information regarding tips and gifts
- An income report that shows the values of any cryptocurrency you mined
- Capital Gains Report that shows sale proceeds, gains, and the cost of every transaction
- A Closing Report that gives your annual net profit/loss, plus your cost basis for the following tax year
Once you have all your reports, you can then input your capital gains right into the tax software of your choice, or print it out and attach it to your tax return. BitcoinTaxes gives you the option to select your preferred accounting method. You can choose between FIFO, LIFO, compare like-kind methods, or average costing. The platform includes this since there is currently no official standard for accounting in place as it applies to the taxation of digital currencies.
Please note that when purchasing your BitcoinTaxes software, that it only applies to a specific tax year. One drawback to using the BitcoinTaxes platform is that it does require you to enter the coin price for a specific time-frame manually. Therefore, there is likely to be more work for you as you enter your cryptocurrency information.
The platform does offer price ranges for individuals and traders. However, you won’t have an exact price until you create a free account. BitcoinTaxes is currently available to those who reside in Australia, Canada, Germany, the United Kingdom, and the United States.
#5 Coinbase Tax Calculator
We include this tool on our list since Coinbase is one of the largest exchanges on the planet. Last year, Coinbase released its tax calculator tools to encourage those using the platform to file their taxes. These tools are provided to help tax professionals and individuals as they prepare their cryptocurrency tax reports.
Using the Coinbase tax tool lets you generate a report that provides all your buys, sells, and trades which occurred within your Coinbase account. Please note that if a payment reversal took place, it would not be part of your report.
This report creates a costs bases for which you or a tax professional can determine the gains and losses of your investments. You can then run the generated report through the calculator that Coinbase provides or through your own external calculator.
Coinbase makes sure to point out that there is no set standard set forth by the IRS which dictates how to calculate your taxes based on digital currencies. The platform recommends you use either SpecID or FIFO, which are two of the more common approaches. It might be wise to discuss the best method for you with a tax professional.
Coinbase has its calculator using the FIFO method which provides a high-level view of your gains and losses throughout the year. The Coinbase tool is great for those who primarily use the exchange for buying, selling, or trading. However, this option does have its drawbacks.
The Coinbase calculator tool won’t cover:
- Cryptocurrencies received or sent from a wallet that does not reside on Coinbase
- Digital assets received or sent from another exchange
- Cryptocurrencies bought or sold on a different exchange
- ICO information
- External storage holding cryptocurrencies (i.e., Ledger, Trezor, etc.)
If you’re looking for a simple and easy way to calculate your digital currency taxes, you should take a look at ZenLedger. The platform is integrated with all the leading cryptocurrency exchanges and supports the vast majority of the more popular fiat and crypto currencies.
The ZenLedger solution imports your history of transactions from various exchanges into its interface. Then, the platform automatically fills in your tax documents and information. Included in these documents are your income reports, closing reports, donation reports, and capital gain reports. You’ll also get a profit and loss statement for you or your tax professional to use.
Any document created through ZenLedger is IRS-friendly. This means you can use them in conjunction with your other tax return solutions without a problem. The great thing about ZenLedger is that it’s perfect for anyone. Whether you occasionally buy and trade or you’re a serious miner, it’s an easy platform to use.
ZenLedger offers three separate pricing options, which vary based on what you need. The cheaper plans give you basic documents and support, whereas the more expensive choice gives you the option to grant access to your tax professional. Either way, ZenLedger keeps things smooth while providing you with a sleek and straightforward user interface.
No one enjoys doing their taxes (well at least no one I know). Thankfully, there are solutions out there to makes things more comfortable and less stressful when it comes time to do them. While regulations and rules surrounding cryptocurrencies continue to change and adjust, it’s crucial that you get out ahead of financial authorities to avoid future penalties and fines.
Using one of the options mentioned above will give you a head start on ensuring that you’re reporting the necessary information on your taxes because let’s face it, the governing authorities aren’t going away anytime soon. Keeping track of your digital currency tax information can be a challenge, so if you’re unsure, reach out to a professional for help.