You got into Bitcoin last year, made some trades, and now it’s time to pay your cryptocurrency tax. That’s right. Even though Bitcoin was founded on the idea of cutting go-betweens out of the whole financial process, the U.S. Internal Revenue Service still wants its share of your profits.
Regulation in the Bitcoin and cryptocurrency sphere, in general, is unavoidable, so it makes sense to play by the rules. However, even the IRS isn’t entirely clear on what those rules should be.
They can seem impenetrable to all but the most seasoned tax professional. Even if you plan to just hand over everything you have to a crypto-savvy accountant, it can save you time and money to have a properly formatted table of your past trades and your estimated tax liability. Remember, any billable time you save your accountant is ultimately money you save yourself.
Luckily, there are a host of tools you can use to simplify paying your Bitcoin taxes whether you choose to file by yourself or seek professional help. Here’s a rundown of the most popular tools available to help you figure out your Bitcoin tax liability and hopefully save yourself money and aggravation.
CoinTracking works like a personal organizer for your cryptocurrency portfolio. It offers several different account levels, including a free one, based on the number of trades you plan to make.
CoinTracking lets you keep track of your trades across multiple exchanges and provides real-time graphs of your gains and losses. CoinTracking also has a built-in tool to help you calculate your potential tax liability, simplifying the entire process. CoinTracking also has an Android app, so you can check on the progress of your crypto portfolio on the go. Check out CoinTracking at https://cointracking.info.
The most popular portal for converting fiat cash to cryptocurrency in the U.S. is Coinbase. Coinbase has a built-in trade tracker that exports easily, allowing you or your tax professional to create a sturdy record of transactions.
Coinbase is limited to a select few cryptocurrencies, so there isn’t a lot of room for serious altcoin trading, but it’s great for keeping track of the big boys, like Bitcoin, Ethereum, and Litecoin. Coinbase accounts are free and so are trade reports, although trading and withdrawal fees apply. See the Coinbase website at https://www.coinbase.com for more details.
TokenTax is a tax reporting service that specializes in cryptocurrencies. The company’s tax reporting plans begin at $19.99 and feature integration with several popular exchanges as well as other tax-reporting software. The basic plan is fine for the average trader, while the pricier plans include schemes for figuring out mining revenue and depreciation, initial coin offering gains, and other more esoteric cryptocurrency liabilities. The $1,499 VIP plan even includes assistance with potential IRS audits. Learn more at http://tokentax.us.
Bitcoin.tax is a paid tool for sorting out your cryptocurrency tax liabilities. It is not a reporting service, so you can keep your personal information to yourself. In fact, Bitcoin.tax even accepts payments in Bitcoin, if you don’t want to reveal your financial information to the service. It only requires a login, which can be created anonymously via Gmail. Despite the name, Bitcoin.tax offers support for all cryptocurrencies and accepts trading history exports from a laundry list of different exchanges. See what it has to offer at https://bitcoin.tax.
LibraTax is one of the oldest and most established cryptocurrency tax calculators. Most of its options are free of charge, although some premium features, like options reports, do come with an attached fee. LibraTax is also only free for individuals, so it’s going to cost extra if you’ve registered as an LLC or want to handle the crypto taxes for your small business.
LibraTax exclusively handles U.S. clients, so that’s a potential drawback. However, it’s worth noting that the U.S. laws regarding cryptocurrency are some of the most confusing around. It’s worthwhile, then, to look and see what LibraTax has to offer if you’ve done all your trading in the U.S. Explore LibraTax and its extensive U.S. tax questions database at https://www.libratax.com/login.
Reddit Bitcoin Forum
This last one is less of a cryptocurrency tax tool and more of a catch-all Bitcoin tax knowledge database. Reddit is a social media platform made up of hundreds of different communities, all focused on a single subject. Reddit’s Bitcoin forum is a discussion board for all things Bitcoin, including taxes. Reddit is entirely free to use, and you can browse the searchable forums without creating an account, although you’ll need to create an account to post a new question.
The process is simple – all that’s required is an email, username, and password that you create. You’re not limited to just the Bitcoin forum, either. There are generalist tax forums – called subreddits – available, as well as ones entirely devoted to crypto trading. Think of it as crowdsourcing your Bitcoin tax woes. Chances are, someone has the same questions you do, and they’ve already found an answer in the forums. Create a Reddit account and get help today at http://www.reddit.com/r/Bitcoin.
Calculating your cryptocurrency taxes doesn’t have to leave you pulling out your hair and sweating over a hot calculator. There are several free or inexpensive tools available to streamline the process. If you opt to do your crypto taxes yourself, these tools should make the process significantly less painful.
Even if you’ve decided to enlist the help of a professional, these tools can save you time and hassle by giving your accountant a handy database of the trades you’ve made and your estimated tax liability.
The laws regarding cryptocurrency are still being hammered out, but it’s simply not an option to wait on the sidelines and risk incurring a hefty tax bill, full of penalties for unpaid liabilities. Use the tools on this list to keep a running tally of what you owe, so that you’re not fretting come tax time.