A taxable event occurs every time you sell, trade, or otherwise dispose of bitcoin. This makes filing crypto taxes difficult for many investors and traders, huge volume traders. Crypto tax software is beneficial in many ways. Before we go into that, here’s is an article on how to file your crypto taxes with & without a software. Now, here are the benefits of crypto tax software:
Organizes and compiles your data
Purchases, exchanges, and sales are reported in a variety of ways by each exchange. However, for tax reporting purposes, this information must be standardized, structured, and sorted.
This may be pretty time-consuming if you need to track hundreds or even thousands of deals from various exchanges. Data from exchanges is immediately imported into crypto accounting software, which maintains everything in one place.
Establishes the price of each digital asset
It would be best if you determined the fiat cost basis of each asset, as well as the fiat value equivalent of all sales, exchanges, and other transactions, to report your crypto taxes.
This procedure may be automated using cryptocurrency accounting software, which tracks the fiat value values per coin on the day of each transaction.
Calculates your capital gains and loss
It would be best if you determined the fiat cost basis of each asset, as well as the fiat value equivalent of all sales, exchanges, and other transactions, to report your crypto taxes.
This procedure may be automated using cryptocurrency accounting software, which tracks the fiat value values per coin on the day of each transaction.
Formats capital gains calculations correctly
A tax report must be structured with capital gains and losses and their corresponding dates and cost basis. Crypto tax software automatically generates standardized tax forms, such as Form 8949 for U.S. filers and international tax reports for filers in many other countries, based on the data and computations.
Tracks your current year gain/loss and tax liability
It’s critical to maintain track of your profits and losses throughout the year so you can pay your taxes when tax season arrives. To simplify this process you can use a tax calculator to crunch the numbers. By the conclusion of the tax year, you’ll want to know how much tax you owe and if you have any unrealized profits or losses. To decrease your taxes, you may want to utilize crypto accounting software to harvest your losses.[adsense]
How to find the best crypto tax software for your needs
Crypto tax software simplifies your life by collecting your data, calculating your tax due, and producing reports in just a few simple clicks. When it comes to choosing the finest cryptocurrency software for tax preparation, there are a few things to consider:
- You should be able to upload all of your cryptocurrency CSV files, link your APIs and wallets, and integrate your crypto exchanges seamlessly with crypto tax software.
- Look for a platform that allows you to see all of your taxable events in one place, such as the TokenTax dashboard shown below.
- Ensure that the software creates the required tax paperwork automatically and that it handles more complex tax scenarios. For U.S. taxpayers, the crypto tax software should create Form 8949 and foreign gain and loss reports. It should also export files for all major tax preparation software, such as TurboTax or TaxAct.
- To reduce your tax burden, crypto tax software should track your current-year tax liability as well as automate tax-loss harvesting at year’s end. You should also anticipate the program to be CPA-friendly so that you can collaborate with your preferred internal or external tax preparer.
