Since its inception, cryptocurrency has taken over the world of investors by a storm. After going through a volatile period, the crypto market is garnering more activity as a result of government regulations and institutional dollars. It won’t be wrong to say that most accredited investors are evaluating crypto investments for their portfolio.
As more and more investors consider to take first-mover advantage, the crypto market is set to grow in size. However, the ecosystem is still evolving and becoming more complex. One such area of complexity is computing tax on crypto investments.
Although the IRS has laid out rules and regulations for tax on crypto gains, several investors still find it a gray area. If you are one such investor who doesn’t know how to compute your capital gains or how to pay the tax, you can use a crypto tax software. You can find crypto tax calculators online to make this task easier and smoother.
Most of these platforms reconcile your cryptocurrency gains and losses after compiling all your transactions. They may not compute your tax on your earnings. Thus, it is crucial to find a platform that does what it says.
To find the best solution, you can look for the aspects explained below, when you search for a crypto tax online solution.
For an easy and fast computation of tax, you need a solution that can easily integrate the exchange reports. You only need to download these reports, and the software should do the rest. It is the first feature to look for when searching for a crypto tax product.
There are two types of Application Programming Interface (API) import and Comma Separated Values (CSV) import. The former is not only more comfortable but also accurate to integrate your wallet and transactions into the tax-calculating software. Using it is extremely simple and easy to learn.
All you need is the API key of your exchange or wallet. Paste it to your online tax calculator. When you paste it to the crypto tax platform, it will automatically download all the information and in the format it requires.
CSV imports, on the other hand, can be more time-consuming. To use them, you will have to download your transaction report in the CSV format and manually upload it to the tax-computing platform. In some cases, you may even have to make manual changes to match the required format.
It is another significant consideration if you are an ardent crypto trader and have numerous transactions. While it may not make much difference if you are using free software to calculate crypto tax, it is essential if you are planning to buy one.
The tax software may crash while processing a vast number of transactions. To avoid such circumstances, you can read the fine print or talk to the customer service for a better understanding of the product before buying it.
We all know how vital it is to stay compliant with tax regulations. You don’t want to trust a product with blind eyes and regret your decision later. To ensure that you are fully compliant, study a bit about the legitimacy of the tax-computing platform.
An easy way to do this is by getting to know the people behind the product. Look for a team that has members with a tax or regulatory background. Thorough research on the platform’s credibility is necessary.
Crypto tax computation is a challenging task, even for the most experienced CPAs. As an individual who is trying the platform for the first time, you may need a few testings. It is particularly essential if you are planning to buy software for crypto tax purposes.
Look for a platform that allows you to test and explore the platform with dummy data. Adequate training resources like videos and presentations can also be helpful.
Support for multiple exchanges
Crypto trades and investments take place inside exchanges. You may be using one or many of these exchanges as per your personal preference. To ensure that you get desired results, you need a solution that is compatible with multiple exchanges.
Searching for such a flexible tax software serves several purposes. Firstly, you don’t have to get used to multiple platforms and systems. Secondly, it will save you a good deal of time and effort.
Support for all crypto activities
Investing, buying, and selling cryptocurrencies are just a few of the activities in this space. If you are an avid investor, you may need support for more advanced actions like forks, airdrops, and cloud mining. Thus, it is beneficial to find a product that supports all of these.
Seamless integration with other tax calculators
Calculating your crypto taxes is only one aspect of the tax filing process. You will also need to integrate this information with your business and personal income for filing your tax returns. Thus, it is suggested to look for online solutions that can integrate with traditional tax calculators.
If you can find such a free crypto tax calculator, reconciling and filing your tax will become a cakewalk.
Solid customer support
Whether you are using a paid or free tax calculator, you may come across several challenges while computing your crypto taxes. For instance, it may not accept your CSV file or won’t integrate with the reports from your exchange.
The problem compounds if you are new to the field of crypto trading, and this is your first year of filing your crypto taxes. To resolve such issues, try to find a platform that has robust customer service and support.
Crypto trading is still an evolving space. Due to the lack of consistency, the best solution is the one that is flexible and versatile. The platform should allow you to make manual entries for specialized transactions, and they should allow you to upload and download different formats.
Using a reliable and versatile solution can significantly reduce your stress while calculating your taxes. Look for the above features, and you will be all set to go.