Cryptocurrencies are all the rage right now, and for a good reason! Their value has been exploding in recent years, and there’s a lot of potentials for them to continue growing in the future. But with this popularity comes a new set of challenges, like tracking your crypto investments and paying taxes on them. Luckily, there are several excellent crypto tax software options out there that can make this process much more manageable. We will look at the five best crypto tax software tools currently available and see how they stack against each other. Let’s get started!
Here are The 5 Best Crypto Tax Software in 2022
When you consider how many work-from-home crypto transactions you completed during the epidemic lockdown that gripped 2021, relax knowing tax specialists have developed crypto tax software to help organize and adhere to IRS standards.
Koinly is a popular crypto tax software with a simple, user-friendly design and works well for novices. You may import all of your data and get a complete report for $49 per year with the Free plan, or you can use it yourself with a $49-per-year subscription. It has the most integrations with crypto exchanges/wallets and covers the broadest range of blockchains.
“Koinly can assist you in generating your crypto tax reports — no matter where you reside,” says the company’s website. “From the United States to Scandinavia to Japan and every country in between.”
- Free: $0 per year
- Trader: $179 per tax year
- Newbie: $49 per tax year
- Hodler: $99 per tax year
- Pro: $279 per tax year
CryptoTrader.Tax/CoinLedge is a cryptocurrency tax software tailored to save you time and maximize your return, as its name implies. It supports over 350 exchanges and allows you to export data to your tax software. CryptoTrader Tax / CoinLedge offers a 14-day money-back guarantee. “Cryptocurrency tax software built to save you time and maximize your refund,” according to CryptoTrader Tax / CoinLedge.
- Hobbyist: $49
- Day Trader: $99
- High Volume: $199
- Unlimited: $299
Tax laws and rules are constantly changing, so Taxify’s TaxTraking module updates to keep track of your finances. It calculates all reports, including capital gains, income, costs, gifts, losses, and closing positions. You can hire a CPA to manage your account and file cryptocurrency taxes if you purchase the Full-Service package.
CoinTracking is a cryptocurrency tracker that tracks the prices of 18,873 coins and assets. You’ll always have an up-to-date view thanks to CoinTracking’s support for over 18,873 cryptocurrencies and investments. There are 13 tax methods, 100+ country reports, and no need to log into your exchange.
The cost varies depending on the package and region, but it is USD 10.99 per month if paid annually.
TaxaBit, which comes in at a bit more than TaxBook, offers an essential service that includes unlimited transactions for $50 per year. It supports all exchanges. Taxbit’s sophisticated platform is meant to be “the most trusted platform that combines digital assets tax and accounting across enterprises, consumers, and governments.”
- Basic: $50 per year
- Prus: $175 per year
- Pro: $500 per year
If you only made 25 or fewer crypto transactions in 2021, ZenLedger’s free edition will be sufficient. It supports over 400 cryptocurrency exchanges. All of its plans, including the free ones, let you “quickly aggregate crypto transactions from numerous exchanges.”
- Free: $0 per year
- Starter: $49 per year
- Premium: $149 per year
- Executive: $399 per year
What is Crypto Tax Software?
Any computer program that makes it simpler for you to deal with the taxes connected with your involvement in the cryptocurrency market is referred to as “crypto tax software.” This software often includes a complete crypto portfolio tracker. This lets you see your crypto holdings in one place, across different platforms and wallets.
Using crypto tax software eliminates the need to learn a new crypto tax code, keep up with any updates to the law, keep track of all your crypto trades regularly, and file taxes yearly for cryptocurrency traders.
How Does Crypto Tax Software Work?
The most efficient cryptocurrency tax program automates as many crypto tax procedures as possible. As a result, the most acceptable crypto tax solution available should enable users to do as little labor as feasible when submitting their bitcoin-related taxes.
In terms of various types of automation, this type of program can figure out the current taxes associated with cryptocurrencies in your area, automatically import your cryptocurrency transactions from exchanges and wallets, and make it simple to file your taxes.
The History of Paying Taxes on Crypto
The first thing to note about bitcoin and crypto taxes is that they have never been tax-free. While the specific taxes levied on crypto vary by nation, it wasn’t until various tax authorities began discussing the issue that such activities as mining, trading, and spending bitcoin and other cryptocurrencies were nonexistent.
Because most governments will always endeavor to collect taxes on the citizenry’s earnings, the notion that they’ll overlook the first few years of bitcoin when the crypto asset wasn’t really on the radar has no validity.
The US Internal Revenue Service (IRS) was the first significant tax agency to address bitcoin and “virtual currencies” in 2014. The IRS classified virtual currencies as movable property at the time. The IRS has added a new question to Form 1040 for individuals to check if they have been involved in any cryptocurrency-related activities over the last year, fast-forwarding to 2019.
The first bitcoin tax software appeared in 2013 when there was just one crypto asset that people were paying attention to in the market. Around the same period, Coinbase and other major exchanges began automating much of their users’ tax reporting procedures.
This tax automation may be included directly in some cryptocurrency wallets shortly. The reality that spending crypto entails tax implications in many countries worldwide is a serious barrier to this technology becoming a mainstream payments solution at this time.
Importance of Tax in Cryptocurrency?
Let’s look at why crypto taxes are so necessary now that we know what they are. Paying taxes on your cryptocurrency gains is required by law. You could face severe IRS penalties if you don’t pay your taxes. Second, paying taxes on your cryptocurrencies can help you save money in the long run. You might avoid paying more later if you paid tax on your gains now. Finally, paying taxes on your cryptos demonstrates that you’re a responsible investor who takes their craft seriously.
How and When to File Cryptocurrency Taxes
The ideal approach to pay crypto taxes is by utilizing a tax software that has been created especially for this purpose. There are a variety of such systems on the market, all of which are simple to use. Examine and compare the various options to determine which is best for you.
The deadline to pay your income and franchise taxes for 2021 is April 18, 2022. The deadline to file your return, Form 1040, is also April 18, 2022; however, you can extend the filing date until October 17, 2022. On Form 1040 of the United States Federal Individual Income Tax Return (Form 1040), you declare personal cryptocurrency holdings and other Defi transactions.
If you need to report crypto transactions on a tax return, you must file by the due dates for those forms to avoid penalties. The deadline for Form 1065 and LLC/Corporation returns was March 15, 2022, with an extra September 15, 2022 date. Corporate Form 1120 is due at the same time as Form 1040.
When Do You Pay Tax On Crypto?
If you own cryptocurrency for more than a year, you will have to pay taxes on the profits you make from it. If you have held it for less than a year, you will have to pay taxes at the end of the year.
Can the IRS Track Cryptocurrency?
The IRS can track your activities if you give them your Social Security number and information about any crypto, NFTs, or other DEFi instruments you have bought, sold, staked, or traded. Some people may try avoiding paying their taxes using platforms like Chain analysis. But the IRS is getting smarter and is using these platforms to keep up with people trying to avoid paying their taxes.
With so many alternatives to choose from, especially if they’re all excellent crypto tax filing tools, it’s easy to get confused. All promises aside, if you follow our professional guidance, we’d suggest you try out one of our top tools on the list: Zen Ledger. ZenLedger is a popular program that supports over 400 cryptocurrency exchanges and can provide a tax breakdown in minutes. ZenLedger is also protected with two-factor authentication and verified by the IRS and TurboTax as safe.
Moritz Pindorek (Moritzpindorek.com)
Social Media, Marketing & Blockchain
Crypto/Web 3 Advisor, Top 10 Crypto Influencer 2022(Forbes Monaco) & Top 10 Entrepreneur 2022 (Forbes Monaco)
Owner and writer for Cryptouserguide.com