The Cryptocurrency Tax Software That You Should Be Aware Of

It is no secret that cryptocurrencies have become a part of the mainstream, and rather quickly since the inception of Bitcoin in 2009. Cryptocurrencies now sit at the helm of a massive change in the financial world. If you are looking to cash in and leap into the world of crypto, now would be a great time to do it. Keep in mind that you will have to gain a decent grasp of how cryptocurrencies work, cryptocurrency tax software, and so on.

What is Cryptocurrency?

Before we get to the best cryptocurrency tax software, let us start with the basics of cryptocurrency. Cryptocurrency is defined as a digital medium of exchange that uses crypto functions to secure all kinds of transactions, including purchases, sales, and trades.

An essential thing to keep in mind is the fact that no regulatory or centralized body governs cryptocurrencies. This is not the case with fiat currencies like the U.S. Dollar.

What Makes Cryptocurrencies Different?

Here are a bunch of factors that characterize cryptocurrencies:

• Crypto transactions are not reversible, irrespective of your actions. You cannot reverse a transaction once you confirm it.
• You are not obligated to report to your local bank or any other central entity if you want to carry out cryptocurrency transactions.
• You generally perform crypto transactions on addresses that are made up of multi-character strings. You cannot trace the real-world owners using these addresses.
• Cryptocurrencies are best known for the fact that they are entirely invulnerable to foreign influence. No bank or central authority can back or control cryptocurrencies. They are almost entirely immune to security threats as well.

How do I File My Taxes?

As per the Internal Revenue Service (IRS), cryptocurrencies are considered to be assets for tax purposes. In simple terms, the same rules surrounding capital gains for property will apply to cryptocurrencies as well.

First of all, you will have to declare your capital gains on the IRS 8949 form. There are two types of capital gains taxes - Long-term capital gains tax and short-term capital gains tax. You will have to pay short-term capital gains tax if you decide to sell your cryptocurrency within 12 months from the time of purchase. You will have to pay long-term capital gains tax if you choose to sell your cryptocurrency after 12 months from the time of purchase.

If a cryptocurrency goes through a hard fork, it will be taxed just as income is taxed. However, if it goes through a soft work, no tax will be involved. This, of course, is assuming you are not going to receive new coins as a result of the soft fork.

Cryptocurrency Tax Software That You Should Know About

Here are some of the most notable cryptocurrency tax software on the market today. These cryptocurrency tax softwares can significantly simplify the process of filing and reporting crypto taxes.

TokenTax

TokenTax is a cryptocurrency tax software that has managed to cement its place as one of the best cryptocurrency tax software to hit the market. It is known to support all the crypto exchanges on the market. Here are some of its features that are worth noting:

• TokenTax enables you to produce your tax forms, such as your IRS 8949 form for filing returns. You may import this into TurboTax without issues.
• This cryptocurrency tax software also allows you to track your capital gains, losses, tax liabilities, and other important parameters for every transaction that you perform.
• Another essential feature that TokenTax has to its credit is its tax-loss harvest dashboard. It shows your unrealized gains and losses.

ZenLedger

Here is another cryptocurrency tax software worth discussing.

• ZenLedger has begun to turn a lot of heads, thanks to its wide array of features. Additionally, it boasts an incredibly intuitive and straightforward user interface. Here are some of its highlights:
• It works efficiently with all the leading cryptocurrencies, exchanges, as well as conventional fiat currencies. The best-known examples of the leading cryptocurrencies are Bitcoin, Ethereum, Litecoin, and so forth.
• If that was not enough, it makes way for seamless integration of the information that is associated with your crypto trades. It also keeps all the required documentation secure and ready. These documents include income reports, closing reports, capital gains reports, and many more. It also ensures you are not overpaying your taxes.

CoinTracker

CoinTracker is known to be one of the most reliable cryptocurrency tax software you can hope to get your hands on. This cryptocurrency tax software works very well for experienced crypto traders. You can expect to take care of all your crypto-related requirements. Here's the gist of what it can do:

• This cryptocurrency tax software can help you review your tax summary and get all your completed reports.
• You can also integrate CoinTracker with TurboTax without any issues.
• CoinTracker offers you a multitude of options, one of which is margin trading.
• Its added bonus is the performance tracker that you can make use of to track your crypto investment and portfolio management with ease.

There are a bunch of excellent cryptocurrency tax calculator or cryptocurrency tax software out there for you to explore. These are a few of the best. You will have to do your research and choose a cryptocurrency tax software depending on your experience as a crypto trader and your needs.