Cryptocurrency Taxes - Simplified

Cryptocurrency Taxes - Simplified

By Mynima | Hobbyist Crypto | 25 Apr 2021


Introduction

So I can imagine there were a lot of folks who recently participated in the FORTH token airdrop, I was one of these luck few and judging from the average payouts you can see that in some cases it was a substantial amount. While my first thought was 'this is awesome', especially since I'd stuck with hodling my AMPL through both negative and positive rebases it did raise another question for me about tax liability. Indeed I don't doubt it will have raised similar questions for others as I know a lot of people will have take the opportunity to cash in on the windfall to perhaps buy themselves things they have wanted for some time. So how do we work out if we have tax implication as a result of cashing out or perhaps trading?

If like me you're a follower of @Rah then you may well have seen his recent articles covering this very topic:

These were great stepping stones for me in learning about how to view my crypto earnings and how they link in with taxation. However, the one problem I have found is that I really should have been keeping a better record all along. I'll not lie I have a few different wallets all for different things as well as having used a range of exchanges and DeFi platforms over the past few years. Thinking of all this information and trying to get it into some kind of order is one hell of a daunting task! So, knowing there are cleverer folks than me out there, I went in search of a solution. In this article we'll look at a solution I found to simplifying my previous transaction history and getting to grips with taxation, today we'll look at CoinTracker.io

 


About Cointracker.io

Before diving into my experiences so far let's start with the company missions statement.

Mission

As you can immediately see from the statement above the key goals for CoinTracker are to create an easy to use portfolio management tool that allows you to keep tabs on your wallets, transactions and trades as well as also being able it easily generate/assess your taxes. I must admit I feel a little guilty of almost not caring so much about my crypto-taxes before now, but now I cannot get over how important this kind of a tool really is if we want to see the masses move to into a globally decentralized financial system.

So the product they offer has, as described previously, two main functions:

First, it is a crypto portfolio manager (like blockfolio, without the ability to trade). You get a main dashboard tool where you can link, through APIs, using public on-chain addresses or by uploading .csv files, your transactions and balances for your account. This gives you a way to pool all things into one place to keep an eye on them and is available as standard in the free version. However, as you can imagine, there are paid versions of the tool offering more functionality, that can be tailored to suite the individual. While I continue to test out the tool I am using the free version, though I am temped to upgrade to Enthusiast.

portfolio

 

Along with the portfolio management there is also a detailed (pay once per year) tax section that allows you to keep an eye on your tax over the year. Similarly to the portfolio this has a range of pay levels depending on your requirements.

tax

Interestingly, on the free version you don't get to see your full tax breakdown but it does give you the info only partially hidden (for example +1***.**, fif it were displaying anything between +1000.00 to +1999.99) so you can almost make an informed choice about if you need to by the tax plan (at least for the UK where we need only declare when we've reached the taxable threshold if you are putting it under capital gains tax). The breakdown of tax information in the dashboard looks this.

Tax02

While I am still going through adding all of my items this feature, of being able to to at least see how many digits are in a field along with the starting number, has made it so that I know (with some degree of accuracy) that I was not liable for any tax in 2019 or 2020, and with the way things are goin hopefully not in 2021.

If you want to learn more about crypto taxes in general the team actually have a great support article with loads of detail, I recommend you check it out directly:

https://www.cointracker.io/blog/crypto-tax-guide

 


How it Works

Now initially I thought I'd go through a bunch of screenshot to show you how linking wallets works or how to do your taxes using CoinTracker but instead I found this great video on their support site which goes over the process.

To follow on from the video, however, I will highlight a few minor teething issues I've experienced so far so as not to give you a false impression that it is all as smooth it looks.

  • DeFi - Particularly the BSC yield farming stuff are a little tedious. Most of these work on the use of 'placeholder' tokens which mean that you effectively create a tax event when you trade between these placeholder it can be a bit of a pain figuring out how to adapt these transactions as the prices are 0 really for those tokens (I'm still learning this) 
  • CoinbasePro - I must have loaded the API 4/5 times and even still it never has worked. I am attempting the .csv route with this now.
  • Public Addresses - Not all blockchain address will work currently so you do need to upload a .csv for some. A lot of block explorer sites though let you download the transactions which is handy and the team offer a template .csv which also speeds up the process.

Currently, this are not show stopper issues for me, though they are a bit annoying at times, I think as I get used to the process it will get smoother.

 


Final Thoughts

I'm all for making a bunch of magic internet money, but strongly feel that doing so needs to remain above board and contribute to society (through taxes) when applicable. On the flip side having not really had to do my own taxes before and the government rules on crypto-tax being confusing as hell it can be a bit of a daunting task. CoinTracker is in my mind an excellent solution to try help us to simplify the tax rules and manage portfolios at the same time. The dashboard doesn't have a lot of features for the free version but it is reasonably intuitive and so far I've enjoyed the experience.

If you do plan on pickup up CoinTracker and decide to go down the route of a paid plan then consider using this referral link (below), you'll get a 10 ($/£/€) discount so it offsets a little of the cost. In the meantime the free version is worth a go, just to get used to it and see if it is for you.

https://www.cointracker.io/i/HakTIbfZhnl9 

Thanks for reading, hope you find CoinTracker a useful way to get a handle on the tax implications of your crypto, good luck y'all!

 

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Mynima
Mynima

Hobby miner and Crypto interested programmer. https://mynima.github.io/


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