It is once again time to get your P's and L's in order, and if you're one of the roughly one in ten Americans that own cryptocurrency you could owe taxes on any gains that you may have.
The IRS wants you to know that your impending crypto fortune will not come tax free, as cryptocurrency is treated as property. For guidance on whether or not you owe taxes on your crypto, be sure to read the statement from the IRS or ask an accountant. If you're not sure if you owe taxes on your virtual currencies, here is a quick summary for what constitutes a taxable event.
Do you owe crypto taxes?
- Selling or exchanging cryptocurrency for fiat currency
- Exchanging one virtual currency for another virtual currency
A fiat currency is legal tender backed by a government entity. So if you sold or exchanged virtual currencies in exchange for U.S. Dollars or some other foreign currency this would qualify as a taxable event.
If you exchange one crypto for another, the IRS treats it as if you received fiat in exchange for the currency you sold in exchange for another. For example, if you exchange BTC (Bitcoin) for ETH (Ethereum) you would have to pay taxes on any gains that you earned while HODLing your BTC.
- Moving cryptocurrencies between wallets
- Buying cryptocurrency (you only pay taxes when you sell)
- Airdrops (a marketing tactic usually associated with the birth of a new virtual currency).
If you have been exposed to a taxable event in crypto make sure you capture it properly. As the popularity and ease of access to cryptocurrency improves, so have the tax tools. Prior to filing taxes in 2019, most of us here had to diligently maintain spreadsheets to capture our gains/losses. This often became tricky as we move items between wallets (incurring small fees for doing so), receiving airdrops, or generally exchanging one virtual currency for another. Last year, we reviewed a few of the products available for cryptocurrency tax filing, and this year we will highlight another one.
If you're looking for a website which can help you file get organized for your cryptocurrency taxes, look no further than Koinly. To get started, you create an account, add your wallet/exchange, and Koinly will import your transactions.
We found the interface to be a simple and streamlined approach to organizing our crypto transactions. Within 5 minutes, we had connected one wallet, and two exchanges to our Koinly account. Almost instantly, our transactions were imported and our dashboard updated to reflect our historical gains and losses and current holdings.
Another impressive feature is that our transactions were accurately categorized as either a deposit, withdrawal, buy, sell, transfer, or exchange.
The Price is Right
When evaluating any product, one of our primary considerations is price. Identifying a crypto tax solution is no different here, and Koinly offers one of the simplest pricing options to be found in crypto tax products. It should be noted that you can connect your crypto accounts for free, and you will only need to pay up if you wish to export a tax report. The cheapest plan which is likely suitable for most, is $79/year for up to 300 transactions (also known as the Hodler tier). If you're an avid crypto trader you might be required to bump up to the Trader plan for up to 3000 transactions, or the Oracle plan for up to 100,000 transactions. These plans are generously priced relative to the rest of the space.
We're looking at this product primarily as a means to track and report or taxes. This is one of the things that Koinly does best. Here is a quick run down of the forms that are currently available for export at time of writing: Complete Tax Report, Transaction History, Gapital Gains Report, Turbotax Report, Income Report, Gifts & Donations Report, Lost & Stolen Report, End of Year Holdings Report, IRS Report (Form 8949 & Schedule D), Incomstdeklaration K4 (ruta D), Swiss Valuation Report.
The above forms support tax reporting in over 100 countries across the globe. If you're not sure if your country is supported, reach out to their support team and they will help you identify if Koinly is the right tax product for you.
Our only gripe with Koinly is that it does not yet officially support Robinhood. You can still work export your transactions from Robinhood and upload a CSV, but it would be much more convenient to be able to connect the two and have them sync automatically as Koinly does with other exchanges. We will be keeping a close eye out for Koinly to add better Robinhood support in the future.
If you use other cryptocurrency services, Koinly may have support where other services do not. For example, Koinly offers support for Blockfolio which is a portfolio tracking tool. If you already have your crypto transactions/holdings captured there, Koinly can import them via CSV and catalog your transactions.
Also noteworthy here is that Koinly offers support for importing from CoinTracking.info, Cointracker.io, and TokenTax which are direct competitors to Koinly. This can come in handy if you want to compare Koinly against the competition, or you know you want to migrate over.
Would we recommend Koinly?
Absolutely. Koinly is a full-fledged crypto tracker and tax reporter that should meet your needs. With support for over 300 exchanges and over 6000 cryptocurrencies, you can file your taxes with ease. If you're looking to get started on your crypto taxes, take Koinly for a spin. Use the link below and receive 10% off Koinly!