Filing your taxes each year can be a long, grueling process. Add cryptocurrencies into the mix and it only further complicates the process. Rather than struggling through the process and risking inaccurate filings, there are better, more accurate ways to file your taxes accurately. From providing proper documentation to choosing the best cost basis method for you, there is no shortage of steps in calculating your cryptocurrency taxes. With so many steps in the process, we recommend leveraging cryptocurrency tax software to speed things up and take the element of human error out of the process.
Before we delve into different software options, let’s explore some frustrating hurdles. There are many issues cryptocurrency users face when filing their crypto taxes, some of the more prevalent issues include lack of supporting documentation, using the optimal cost basis method, and determining the taxability of certain transactions.
Each of the issues above, when left unresolved, can leave the cryptocurrency user with a less than optimal tax liability calculation. For example, without a centralized repository of your transactions, you’re unable to select the specific identification cost basis method.
Additionally, not all income transactions are the same and treating them as such will lead to an incorrect tax calculation. For example, Bitcoin earned as a credit card reward is not taxable until sold. Understanding these nuances is key to an accurate filing.
Cryptocurrency taxes software alleviates the pain of manually compiling your cryptocurrency transactions. Most software includes APIs that allow data to flow in automatically from exchanges and wallet addresses.
Once all of your transactions have been imported, it’s time to calculate your tax liability. Most cryptocurrency taxes software has scenario analysis capabilities built in that will allow you to run your tax calculation using a variety of cost basis methods allowing you to select the most advantageous one.
Lastly, cryptocurrency taxes software enables the ability for transaction tagging. Instead of treating all income the same, you are able to properly identify and tag transactions which allow the software to assign the correct tax rate to the transaction when running scenario analysis.
With years of experience, our team has tried many of the cryptocurrency taxes software on the market. One stands out from the rest, CoinTracking.info.
CoinTracking.Info is your one-stop shop for your cryptocurrency taxes needs. It hosts a full suite of APIs to easily import and maintain your cryptocurrency transaction data from popular exchanges such as Coinbase and wallets such as MetaMask. Once your transactions are in you’ll have the option to run tax liability calculations with a wide variety of cost basis methods, allowing you to choose the most optimal method. Lastly, you can rest assured your tax calculation is correct with CoinTracking.Info’s tagging and data malleability features.
For even more peace of mind next tax season, you can rely on a crypto tax CPA who uses informative software to help with your taxes. If you have additional questions about choosing the Crypto CPA, don’t hesitate to reach out to our team at Founder’s CPA for guidance!
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