Top 10 tips to select the best crypto tax software
8 Sep, 2022 · 4 min read
Are you looking for the best crypto tax software in 2022? How do you select from the several crypto tax tools in the market?
Let’s discover the most important features a crypto tax software can offer you, what to avoid when selecting a tax tool, and why CoinTracking may be the best crypto tax software for your needs.
How to track cryptocurrency for taxes
The best way to track your crypto for taxes is to use a crypto tax tool, enabling crypto trading importing, gains calculations, and tax reports.
Alternatively, you can try to keep a trading journal or manage your trades with multiple CSV files from crypto exchanges, but the time and effort needed to keep those organized are simply not worth it.
One top crypto tax mistake is not keeping updated records of trading activities, leading to errors when filing taxes.
A crypto tax tool is the best way to do your crypto taxes. Let’s see what features you should evaluate when choosing a crypto tax provider.
What features should a crypto tax software have?
1. Wide range of crypto importers, from exchanges to blockchains
One of the most pivotal features of any crypto tax software is the number of crypto exchanges, wallets, blockchain addresses, interest products, and decentralized providers it supports.
One of the most frequent crypto tax mistakes is not tracking crypto trades. This mistake happened a lot due to the lack of options in the market to easily import and track crypto trades. Today that is no longer the case.
Most crypto tax tools support the major crypto exchanges, but not all support blockchain networks, DeFi projects, decentralized exchanges, Metaverse tokens, Non-Fungible Tokens (NFTs), and more.
When choosing a crypto tax software, evaluate your needs, and try to go with the tax software that has the most options and the ones that incorporate new ones at a fast pace.
2. Crypto reporting features, from gains to tax-free coins
Once you import trades into your favorite crypto tax tool, you’ll want to determine the capital gain/loss from your trading.
It’s important to know if your crypto tax tool shows you all the details from every trade in an easy-to-use way.
You should be able to see your realized gain/loss, unrealized gains/losses, dates of acquisition and sale of assets, cost basis, and price metrics.
3. Range of accounting methods for gains calculation and tax reports
If you’re in the US, you’ll probably use FIFO as an accounting method to calculate your gains. However, there are other accounting methods that you can use depending on your situation.
In the UK, HMRC is used for gains calculation and tax reports, while ACB is used in Canada. Other accounting methods used for crypto gains include LIFO, HIFO, LOFO, OPTI, and others.
4. Advanced features for crypto portfolio tracking
How advanced is the crypto tax tool you’re using? Beyond crypto importing, gains calculation, and tax reports, can you track your portfolio with more features?
What statistics can you get from the portfolio? Does it show you which coins are eligible for a lower tax rate based on holding periods? What about statistics covering your balance, portfolio diversification, trade list, fees spent, or average purchase price of your coins?
Can you get a comprehensive view of your portfolio and the market trends all in one place? This is key to tracking your portfolio and doing your taxes.
5. Tax reports with all the information you need
Crypto has its own tax forms. They vary from country to country, but there is some information that is consistently asked by tax authorities, including:
- Dates of acquisition and sale of assets
- Cost basis
- Sales proceeds
- Gains/losses on each crypto trade
Additionally, you may need to split your gains/losses into long-term and short-term due to the difference in tax rates.
The tax reports you generate on a crypto tax tool should have all this information.
Depending on your country, your crypto tax tool can generate reports with pre-filled information in the forms you need.
6. Integrations for crypto tax filing
Once you generate the tax reports you need, it’s time to file your taxes.
Crypto tax software doesn’t do this part of the process, but they enable integration with filing services (e.g., TurboTax) to make the easy transfer of info across platforms.
In your crypto tax software comparison, check what integrations they offer.
7. B2B support and access to crypto professionals
Does your crypto tax tool have access to crypto tax professionals? Beyond the software, if you subscribe to a tax service, additional benefits as reviewed networks for crypto CPAs and accountants across the world is essential as you may need extra help.
8. Full tax service for crypto investors
Beyond the usual features of crypto tax software, from importing trades to generating tax reports, you may need a personalized review from a tax professional.
But, if your crypto tax accountant doesn’t know the crypto tax tool, you may need to transfer everything from one provider to another.
Check if your crypto tax tool has a full service in partnership with leading crypto tax firms to ease this process.
9. Security and data protection
How does your crypto tax tool treat your data? Does it enable read-only API access to import trades? Does it offer institutional-grade security?
For example, CoinTracking just received its ISO/IEC 27001 certification, improving the quality of service, customer data protection and privacy, security, and much more.
10. Value for money
Pricing is important, but value for money is even more. Some crypto tax tools offer free tiers, but they all offer different price points on a monthly/yearly basis.
How much can you get for what you’re paying? How many hours and money are you saving by using a crypto tax tool instead of tracking with excel?
That’s worth much more than $20, $50, or $100 a month, especially if you’ve been successful at investing.
Best crypto tax software 2022
The best crypto tax software for 2022 in the market is CoinTracking.
You can import your trades using CSV or API, track your gains/losses, and generate tax reports according to your preferred accounting method.
CoinTracking is your full crypto tax solution for:
- Importing (API & CSV) your trades from 110+ exchanges.
- DeFi and NFT support with our ETH+DEX importer.
- Importing your Binance Chain, Binance Smart Chain, and MATIC transactions.
- 25+ advanced reports, including which coins offer you a tax-free rate.
- Automatic capital Gains, according to 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB), accepted worldwide.
- Generating complete Tax Reports in your country.
Moreover, CoinTracking can easily classify all your earnings from yield farming, liquidity pools, crypto staking, and much more.
Crypto taxes with no errors: CoinTracking Full Service in the US.
CoinTracking also offers a Full Service for US traders. A crypto reconciliation tax expert from Polygon Advisory Group, a leading US crypto tax firm, will review your CoinTracking account, help fix any errors, and ensure you submit your crypto tax reports error-free.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.