The age of cryptocurrency as magic internet money is well and truly behind us. Cryptocurrency accounting, or at the very least, a crypto tax reporting solution, is now a must-have for anyone touching digital assets. Authorities around the world have woken up to the fact that crypto offers a new source of tax and are starting to clamp down. Whether you’re a casual user, a miner, or a business accepting Bitcoin as payment – all transactions count.
In the US, the IRS has made its intentions clear by issuing letters to cryptocurrency users, based on data harvested from trading platforms. Although they vary in severity of tone, if you’ve received one, then you know they have their eye on you. In the US, cryptocurrencies are treated as property, and not an actual currency, meaning you’ll incur capital gains tax on any increases in the value of your holdings. However, if you’re outside the US, your crypto gains may be treated as income.
Assessing Your Needs
So how can you ensure you remain compliant with your crypto tax obligations? What you’ll need depends on various factors. These include the value of your holdings, the frequency of your transactions, and the type of activity, whether it’s trading, investing, mining or taking payments in cryptocurrencies.
Furthermore, you’ll need to decide whether you want to adopt a tool that simply handles your crypto tax reporting come the due date. The alternative is a more comprehensive cryptocurrency accounting solution that tracks your day-to-day activities across your chosen wallets and exchange and handles the tax reporting element as well.
Below are just a few of the tools and services available. Which to choose depends on your circumstances.
Cryptocurrency Accounting for Power Users
Blox.io is an all-in-one enterprise cryptocurrency accounting solution for businesses, accountants, executives, and crypto miners. It offers features designed to cater to each of these specific groups. For example, a business accepting cryptocurrency would find it easier to use a single piece of cryptocurrency accounting software that can share data between different departments such as sales and finance.
Similarly, accountants are now having to come up to speed with the complexities around cryptocurrency taxes and handle a client base with diverse trading and investment activities. Blox enables accountants and bookkeepers to track multiple portfolios and create custom transaction classifications as needed.
Blox is also one of the only solutions offering a dedicated service for miners, who may be operating multiple nodes as a means of passive income. Tracking incoming mining rewards in real-time is far from passive, without a cryptocurrency tracking software tool to manage the work.
Using a solution like Blox can make life much easier when it comes around to tax reporting time, as all your assets and transactions are easily identifiable in one place.
However, if you’re also looking for tools that will handle the tax reporting element, then there are also plenty of options offering this service. Providers such as ZenLedger and TokenTax offer tax reporting services, on a sliding scale price model that depends on either transaction volume, or portfolio value. These providers also offer various services such as assistance with IRS audits, help if you’ve been hacked, and tax planning and optimization solutions.
Streamlined Solutions for Casual HODLers
If you’re just a casual crypto investor, say holding a few major alts in a small number of exchanges and wallets, then the chances are you can get away with a very low-cost and simple solution. BearTax is one example that starts at a very low annual rate for up to 20 or 200 transactions and even offers a free trial. These kinds of tools are great for users who just want to ensure they’re meeting their crypto tax obligations but without any bells and whistles.
Crypto accounting and tax calculations can be daunting, and nobody likes dealing with the taxman. However, the blockchain community is nothing if not innovative. Plenty of companies have recognized the gap in the market for robust tools and software to meet the compliance needs of all kinds of crypto users. Regardless of your circumstances, there’s a solution out there for you.
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