Since 2014, the IRS has required all cryptocurrency traders (and miners) to report and pay taxes on their income.
For the casual trader, deciding the worth of a couple of Bitcoin transactions might not be an enormous deal. However, frequent crypto traders and miners might want to seem for a software solution to stay their tax returns accurate.
CryptoTrader.Tax is one among the primary bookkeeping companies to concentrate on crypto trading taxes. The service integrates with all the main cryptocurrency exchanges and with two tax software companies also . Here’s what traders got to realize this service.
Cryptocurrency Tax Basics
Cryptocurrency is an asset that’s treated as property by the IRS (even though it refers thereto as “virtual currency”). whenever you trade cryptocurrency (including selling one currency for another), the transaction may be a potentially taxable event.
If the worth (in US Dollars) of the cryptocurrency increased between the time you purchased and sold the cryptocurrency, you’re expected to pay capital gains taxes on the currency.
If you received cryptocurrency for work you probably did (including mining for cryptocurrency), the worth of the currency is taxed as ordinary income. Additionally, interest earned on cryptocurrency is taxed as ordinary income.
One wrinkle to the present puzzle is that taxation depends on the US Dollar value of the calculation. Traders got to seek out the US Dollar value of every transaction at the time of the transaction.
Hunting down of these valuations are often time-consuming, especially if you purchase and sell on multiple exchanges or have multiple wallets.
What Is CryptoTrader.Tax?
CryptoTrader.Tax may be a niche tax product that creates it easy to calculate the taxable burden of all cryptocurrency transactions.
And it doesn’t just support crypto trading. It calculates taxes for mining, interest, airdrops, forks, staking along side the trading activity.
The company was founded in 2017 by David Kemmerer, Lucas Wyland, and Mitchell Cookson and is headquartered in Kansas City, Missouri. CryptoTrader.Tax has quickly grow in popularity and is already employed by over 50,000 traders to report their crypto taxes.
How It Works
If you’re someone who only sold one coin, on one exchange, one-time last year, you almost certainly don’t need software like CryptoTrader.Tax. In fact, CryptoTrader.Tax features a great guide that shows readers the way to calculate crypto taxes on their own. you’ll search the US Dollar value of that transaction and add it to a Schedule D on your own.
By contrast, someone who had dozens of trades, earned interest, and received a couple of airdrops will face difficulties calculating their taxable burden by hand. this is often where CryptoTrader.Tax comes in.
First, the software allows you to attach to dozens of crypto exchanges and wallets.
No matter which crypto exchange you employ , you ought to be ready to connect it and import your trading data. Once your data has been imported, CryptoTrader.Tax helps to classify transactions as either capital gains or ordinary income transactions.
Then it establishes the Fair market price for every relevant transaction. meaning it converts the worth of the transaction from cryptocurrency to US Dollars. Finally, it transfers the income to forms which will be reported on your tax software.
CryptoTrader.Tax offers built-in integrations with TaxAct and TurboTax. Or the forms it creates can simply be handed off to any tax preparer.
How Much Does CryptoTrader.Tax Cost?
CryptoTrader.Tax has four pricing tiers. the first difference in pricing is that the number of transactions each tier supports. Each level creates a Form 8949 for users, capital gains reports, minimizes taxes through tax-loss harvesting, and may be directly exported to TurboTax and TaxAct.
You can import your data to CryptoTrader.Tax for free of charge . you simply need to pay once you’re able to view and download your full report. the corporate also offers a 14-day a refund guarantee. Within that period, you will be eligible for a full reimbursement if you are not satisfied together with your report.
Is It Worth It?
CryptoTrader.Tax costs the maximum amount or quite most tax-filing software, albeit it doesn’t actually file taxes for you.
It does integrate with TurboTax and TaxAct, but should need to pay $100 or more to file your taxes using those services. So is it well worth the money?
For active cryptocurrency traders, the solution will often be, “Yes!” Many traders don’t keep detailed records that allow them to get these reports on their own. If you do, that’s great. you’ll easily file using any tax software.
But if are “> you have been trading crypto all year and just (at tax time) are realizing that you simply should have been tracking your losses and gains, you will need a service like this to assist you file an accurate return. And while CryptoTrader.Tax isn’t cheap, its price tiers are in line or less than competitors like TokenTax.Co and ZenLedger.Io.