Cryptocurrency Taxation is a difficult topic for traders and authorities. A lot of complexities are involved in determining one’s taxable income. The fact that there are not enough clear laws on them makes things even more difficult.
This is what has brought the crypto tax calculator craze. Startups have come up with software that helps traders, miners, and investors calculate their crypto taxes.
However, not all crypto tax calculators are created equal. For the average Joe, a crypto tax software should have the necessary and basic features to make the process hassle-free. But how do you know which crypto tax calculator is best for your purpose? Here’s a checklist to help you make the right choice.
- Unlimited imports from exchanges without restrictions.
- Provides sample documents for all promised exports.
- Supports for centralized and decentralized exchanges.
- An accounting team onboard with cryptocurrency expertise
- Support for all possible crypto activities – Airdrops, Forks, etc.
- Integration with traditional tax software – Turbotax, H&R Block, Credit Karma Tax, etc.
- A transparent pricing model.
- Great and timely customer support.
- Ability to provide a complete audit trail.
- Great features for CPAs in the crypto space.
- Supports Country-specific Tax Systems.
- Active community with good social presence (shows the team is committed).
Let’s take a look at what qualifies each requirement and what to look out for.
No limitations on data import
Filing crypto taxes means that you have to move data from exchanges and wallets. Some platforms allow you to download data in excel or CSV file formats and upload it manually onto your tax software.
Therefore, to make the process hassle-free, a crypto tax calculator should allow you to import your trades from exchanges and wallets seamlessly into your tax software.
Addition of example files and test filings
It’s usually difficult for even CPAs to grasp crypto taxation. As traders and investors, we need a little training on how the software works, the data to feed the system, and how we interpret everything.
Which is why every good crypto tax calculator should provide previous and test filings. This will help starters get their taxes right by testing the software. They can also calculate and file taxes with simulated transactions to see how things work.
Eg: You can try importing transfer your data into BearTax. This will help you calculate with unreal transactions. Thus, enabling you to get a better feel of how things work before buying.
Support for many exchanges as possible
Trades and investments happen inside exchanges. And since we all don’t use the same crypto exchange, supporting some and leaving others will cause a lot of issues.
If you’re looking for a crypto tax software, you should go for those that support as many exchanges as possible. This makes the entire process of portfolio tracking and tax calculation easy.
Compatible with country-specific tax systems
Different countries, different tax laws. This also means what is taxable in one country may not be in another. A great crypto tax calculator considers country-specific tax policies when building solutions for the crypto community.
Support for uncommon crypto activities.
Trading, investing, and sending and receiving crypto are normal day activities in the space. But that isn’t the case when it comes to certain transactions, including forks and airdrops.
If you’re out there searching for a good crypto tax calculator, go for one that has provisions for these transactions. A good software should cover Airdrops, Forks, Cloud mining, and more.
Integration with traditional tax calculators
The journey to filling our crypto taxes doesn’t usually end after we’ve calculated everything with a crypto tax calculator. For most people, this tax has to be added to their other business and income taxes for a comprehensive filling.
A good crypto tax calculator should allow you to easily move your taxable income from your crypto calculator to a traditional platform like TurboTax. This makes it easy to streamline the entire tax calculation and filing process in a single tax season.
Transparency in pricing
This is general for most things out there. People are ready to pay for your product. But they also need to know what they’re paying for. If you’re going for a crypto tax calculator, choose one that shows clearly the payment plans available. Also, show the features each plan comes with. It sucks when traders and investors are suddenly greeted by extra or hidden costs that weren’t mentioned earlier.
Great and timely customer support
A lot happens when calculating crypto taxes. Sometimes, CSVs or Excel files can’t upload. Other times, moving crypto from exchange to your favorite crypto tax calculator becomes a headache. There are a lot of problems one can run into when calculating crypto taxes.
If you’re in the market for a crypto tax calculator, make sure you select one that provides great and timely customer support so you can use a little help when you get stuck in tax fillings.
The crypto tax calculator should be versatile
Cryptocurrency taxation doesn’t have to be rocket science. Therefore, when selecting a crypto tax calculator, go for one with versatility. Important considerations should be
- A way for traders to calculate taxes if their exchanges are not in the support list.
- Manual entries for traders if their mode of trading and investing is out of the ordinary.
- Different formats for uploading and downloading files.
Also, software should be able to conceptualize the different trouble scenarios that traders may get into. This would help developers to provide possible solutions ahead of that.
A crypto tax calculator should have great features for CPAs
Cryptocurrency taxes are not done by traders and investors only. Thus, a good tax calculator should provide great features for CPAs. This is great for tax accountants who have cryptocurrency clients.
A crypto tax accounting team
It could be one person, two people or more – there should be tax professionals steering consultancy. Thus, traders who have specific crypto tax issues can do with a little help from a professional.
At BearTax, we have a strong tax accounting team that comes in from time to time to attend to special issues. Therefore, you shouldn’t worry when you’re stuck calculating your taxes.
A vibrant community
Crypto is all about communities. They help traders and investors learn new things, share their experiences, and more. A tax calculator should have a great community where users share their tax troubles with others.
These communities are places where users and non-users gather. Therefore, it can be a great avenue for anyone to learn how to use a particular crypto software. Also, they’ll get access to answers from community moderators who usually know more about the software in question.
Great places to have a vibrant community are Facebook, Reddit, and Telegram.