Help to automate crypto tax calculations and filings with a software
Welcome, we will help you to automate crypto tax calculations and filings with a software with our 4 step guide.
Crypto tax reporting can be a very time consuming process and therefor we strongly recommend you to check the different available software to automate this process for you.
Everything can be done by giving readable API access and minimum job effort and time consumption from your end. All this can be done with the best crypto tax software on the market.
4 steps to automate crypto tax calculations and filings with a software
We have created 4 steps to help you to automate your crypto tax calculations and file them with a software. This process will save you many hours compared to file these files manually.
- Understand what a taxable event is
- Aggregate all your historical crypto transactions
- Calculate your gains, losses and income in USD
- Filling out the tax form from the calculations
1. What is a crypto taxable event?
A crypto taxable event is an event that is mandatory to report in your tax filings.
There are two different main categories for a crypto taxable event.
- Capital gains (This is when you buy, sell, trade)
- Ordinary income (earn crypto from job, mining, staking, lending)
The challenging part is to calculate all these events in USD. This can be challenging because many cryptocurrencies are denominated in other cryptocurrencies. Read more about the definition of a taxable event and how crypto trading, earning, income and gain is taxed.
However, one of the best crypto tax software will help you to automate this process.
2. Aggregate all your historical crypto transactions
To be able to make a correct crypto tax filing you need to aggregate all transactions from all platforms to a single unit.
It´s impossible to make a crypto tax calculations if your crypto transactions are scattered among different data files.
You can aggregate your crypto transaction history in 2 ways
- Manually
- Use a crypto tax software (API or manually)
3. Calculate your crypto gains and losses in USD or any other fiat currency
Once you have all your crypto transactions in one spot you have to calculate all your gains and losses from your taxable events.
If you followed our recommendations from step 2 and imported all your transactions electronic into a crypto tax software, this step will be very easy to automate.
If you chosed to do it manually you have to look up USD value at the time for each trade.
Now, you can run your data through a crypto tax software. The crypto tax software will calculate gains, losses and income in USD value or your preferred fiat currency. Make sure to check that your fiat currency and your country is supported before you sign up with a crypto tax software.
4. Filing the relevant crypto tax files
Now, you have aggregated all your crypto taxable events in one place and they are all denominated in your preferred fiat currency.
We will keep on writing about USD as the denominated fiat currency and therefor we will refer to US filing documents in this article.
Crypto gains and losses is reported in the IRS form 8949. Fill out each column with each crypto taxable event.
A crypto tax software will automate this procedure. After this, you can download the 8949 and import it to Turbotax or Taxact.
However, crypto ordinary income doesn’t fall into one single tax form. Hence, you might need different tax forms dependent och the specific situation.
For example, mining is usually defined as self employment income and therefor schedule C is needed.
For crypto lending income schedule 1 is needed.
With a crypto tax software you can get your earnings differentiated automatically and download full income report.
After this, you can report your tax file by upload it to Turbotax and Taxact.
The post Help to automate crypto tax calculations and filings with a software appeared first on Cryptocointrade.
Text source: Cryptocointrade
