The best Crypto tax software has sales and marketing that suggests all you have to do is upload a spreadsheet, push a button and all your transaction will be correctly calculated and reconciled for gains/losses…
…Nothing could be further from the truth!
That is, unless you have just a few simple Cryptocurrency transactions each year.
The best Crypto tax software has common issues that have annoyed and frustrated many users. You can find complaints about Crypto software across forums, reviews and from personal testimonials. A Crypto CPA or accountant can recommend the best Crypto software or do all the tax accounting for you.
One of the biggest challenges with Crypto tax software lies with the vast amount of exchanges and other platforms available for to trade or exchange tokens. There are dozens of such platforms and approximately 6,000 types of crypto currency on hundreds of different exchanges. If you have transactions in a few virtual currencies or used more than one exchange, the software may not support all the crypto types you have.
Even the best Crypto tax software is NOT compatible with all cryptocurrencies or all exchanges.
If the Crypto software you’re using does not directly support the exchanges and various types of crypto you transacted, you may have to manually input hundreds or even thousands of transactions to get your historical data into the program.
Moreover, the downloaded spreadsheet you get from some exchanges may not be in the correct format that you can upload to the format. The Crypto tax software may require a tedious amount of spreadsheet gymnastics to get it work. That doesn’t consider the hours of time this might require including time away from a person’s highest and best use of time in your business or profession.
Other problems with the best crypto tax software relates to actual functionality, painfully frustrating glitches and bugs encountered using these platforms.
Some Crypto software offers various bookkeeping method options…but, which of these will give you the lowest tax savings?
- Can you confidently make decisions based on this software for what accounting method to use and how you will file your taxes based on the info?
- Does the Crypto tax software really work the way you expect?
- Are there bugs that require hours of frustration to find work arounds?
- Does your software account for margin and transaction fees?
How do you account for margin trading or crypto transaction fees? (That is if you even got everything inputted into the software to begin with.)
If you traded crypto on margin from an exchange like Kraken or Poloniex, you need to be aware that these types of trades will be more difficult to deal with. Many Crypto software products do not features that add and calculate margins fees and other fees charged by the exchange.
You should make record keeping a high priority in your crypto activities.
Because you do not even know what you’re legally required to disclose on your tax return without this basic information. And the taxpayer always bears the burden of proof if their tax return gets an IRS audit. Keep these tax records, accurate, up to date and airtight and you’ll avoid problems with the IRS and state tax authority.
Even the best Crypto tax software can disappoint you, waste a lot of time and you may not be any closer to having accurate transaction records.
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