Figuring out how much tax you’re due the authorities at the end of the financial year isn’t the most joyful of endeavors, but it’s a necessary one. With tax laws on cryptocurrency holdings varying wildly by jurisdiction, not to mention the fact that most traders have tokens held in multiple exchanges and wallets, calculating your pecuniary liability on digital assets can be incredibly difficult when performed manually.
Preparing your annual filing becomes exponentially easier with the right software to assist. Dedicated software exists to help you enumerate crypto taxes, reduce tax liabilities, and seriously reduce administrative time, freeing you to focus on trading, or whatever your crypto vocation happens to be.
Blox is a suite of cryptocurrency accounting, tracking and management tools, pitched at various entities in the cryptosphere, from asset managers and mining operations to crypto funds and VCs. Preparing your crypto taxes is a piece of cake thanks to this intuitive platform, with the ability to set up trading frequency (daily, monthly or ‘hodler’), auto-sync wallet and exchange accounts with real-time fetching, and configure default fiat currency to display the value of your holdings. Thousands of cryptocurrencies are listed, and uniquely, Blox has pioneered a range of tools specifically for cryptocurrency miners, including cloud-hosted mining solutions which permit the segregation of rigs into separate portfolios.
BearTax helps all manner of crypto traders keep on top of their investments. With this comprehensive tax filing assistant, users have the option to consolidate trades across 40+ popular exchanges via API, and also to quickly calculate capital gains. If you trade on an unsupported exchange, meanwhile, you can easily import CSV files and let the software calculate liability on your gains and losses. Better still, you can avoid quirks such as negative balances thanks to the smart matching algorithm, which pairs deposits and withdrawals across supported exchanges based on imported transactions. Geared towards sole traders, CPAs and enterprise-level accountancy firms, BearTax adheres to cryptocurrency tax guidelines in the USA, Canada, Australia, Japan and India.
Developed in collaboration with KPMG tax consultants, Koinly is tax software that is both straightforward and effective. A third bonus: it’s incredibly accessible, supporting over 100 countries including the USA, Canada, the UK, Ireland, Australia and New Zealand. Actually, Koinly can generate accurate reports for any country that accepts FIFO, LIFO and Average Cost accounting methods. As with BearTax, data is simple to import via API, public keys and CSV files, with 33 exchange accounts, five wallets and six blockchains permitted per account. Run off reports to cover income from mining, donated coins, and export transactions to other tax filing systems as necessary. The biggest plus might be that Koinly supports over 6,000 cryptocurrencies plus all Ethereum tokens – even custom ones.
With CoinTracking, you can run off real-time reports on profit and loss, the better to satisfy tax authorities with accurate reports come the end of the financial year. As with the other tools mentioned above, data can be directly imported – in this case from eight wallets, 54 crypto exchanges and 15 closed platforms such as Mt. Gox. On the dashboard, which is characterized by vivid graphs and eye-catching pie charts, you can even keep abreast of market trends. Other income and expenses such as mining, gambling profits, gifts or margin trades are also calculated automatically in the tax report, providing they are marked correctly.
The Bottom Line
Given that tax authorities are increasingly leaning on exchanges and even individual crypto investors, it’s a good time to ensure your books are up to date. Tracking cryptocurrency trading activities and generating related tax reports might seem like an inconvenience, but once the software’s up and running, your only regret will be not having done it sooner.