There is no way around taxes, not even in crypto. That’s why you need help submitting your taxes correctly so that you don’t get into trouble with the law, depending on where you live. To do this, you need crypto tax software to help you calculate your tax.
In this article, we will examine crypto tax software and why you should use it to file crypto taxes.
What is Crypto Tax Software?
Crypto tax software is software used to prepare crypto taxes. It simplifies the process of filing taxes and makes it possible to complete the tax registration in a matter of minutes. Crypto taxes are here to stay, which is why top exchanges like Coinbase report to the IRS the activities of their users for proper tax monitoring.
There are many crypto tax software out there. While some are free to use, others are paid but with free plans with limited features. Because the software is already programmed, anyone can use it to file taxes, even without technical knowledge or programming.
Apart from calculating taxes, crypto tax software also helps in tracking your crypto portfolio. You can use it to organize your transactions and track your transaction history. All of this helps you sort your transactions into gains and losses, which can be automatically translated into tax filing.
Examples of crypto tax software are Cryptotaxcalculator, ZenLedger, TaxBit and Coinpanda.
Why Use Crypto Tax Software?
The crypto space is still emerging as it is a new technology. But as new as it is, governments are looking to get taxes from the industry even though they don’t yet have clear regulatory guidelines for the space. This makes managing crypto-related tax filing challenging, so you need crypto tax software to automate the process.
Using crypto tax software saves you a lot of stress that you have to go through if you register your tax manually. First, it calculates your tax within minutes, which saves time. The tax calculation is also usually very accurate, reducing your chances of getting into trouble with law enforcement due to incorrect taxes.
Since it is also a crypto tracking tool, it helps you track your portfolio seamlessly to make informed investment decisions.
Even more than this, most of them are equipped with a crypto tax loss collection tool that ensures that you don’t pay more tax than you should. This also helps you save money.
Crypto tax software is usually programmed with regulatory requirements in each country the software supports. For example, if a crypto tax software supports users from the US, it will be programmed to file taxes with US laws factored in.
Using the software then ensures that the tax meets the requirements of the law in whichever country you submit the tax.
How Does Crypto Tax Software Work?
Crypto tax software automates the process of not only filing taxes, but also managing your crypto portfolio and more. Additionally, depending on the particular software, it can be used to harmonize portfolios for many cryptocurrencies across exchanges and wallets.
Once you have decided which software to use, you need to connect it to your exchange or wallet account. Once this is done, the software automatically organizes your transactions, including selling, buying, trading and even receiving cryptocurrency as payment.
It then separates them into gains and losses, which determine what you should pay tax on and what you shouldn’t, depending on the local legal requirements of the country. This information can either be automatically filled in to file your taxes, or you can choose to file manually.
The software also generates IRS forms for various types of taxes, which you can fill out with the provided information to file your taxes. Some crypto tax software, such as Cointracker, also provide information about the general crypto market, with live cryptocurrency prices so you can monitor the market.
Who Should Use Crypto Tax Software?
The Internal Revenue Service (IRS) has recently renewed its efforts to crack down on tax evaders because of how seriously it takes taxes. Therefore, anyone involved in crypto investing needs crypto tax software to file their taxes easily and accurately.
Crypto tax software is useful for individual crypto investors and corporate users who manage the portfolio of many clients. A package is usually designed for each of these categories, tailored to fit their unique needs.
Whether you are a private crypto investor, a trader or a portfolio manager for many clients, you can use crypto tax software to easily and accurately manage your portfolio and file your taxes.
How Much Does Crypto Tax Software Cost?
Each crypto tax software has its own pricing, depending on the features you want to access. Typically, an individual license for crypto tax software will set you back less than $100, although fees vary from software to software, and some have much higher fees than others. While some do not have free plans, most do, although this only provides limited access to the software’s services.
Others don’t have free plans, but offer a trial period where you can either access the full range of services for the trial period, or you get access to limited services and can only access more by paying for a subscription.
You should decide in advance how much you want to do with the software before subscribing to a plan. If you pay for an advanced (and more expensive) plan, you may find that you don’t need most of the services you can access with such a plan.
Crypto Tax Software makes tax filing easy
Filing crypto taxes can be intimidating, which is why people dread tax season. However, by using crypto tax software, filing taxes can be done in a matter of minutes, rather than spending days trying to sort through your crypto transactions and then decide how much to pay.
Manually filing taxes is not only hectic, but it can also be inaccurate and you could end up paying more than you should. Therefore, you should use tax software whenever you can, as the advantages outweigh the disadvantages.
