Anyone who has gone through the headache of reporting their crypto taxes knows that it’s not a fun process. Because Bitcoin and crypto are treated as property by the IRS, they are subject to capital gains taxes just like stocks, bonds, and other froms of property. This means that in order to report your crypto transactions in the US, you need to know what the US dollar value of the cryptocurrency was at the time you traded or sold it.
I used CryptoTrader.Tax this year to automate the whole process. In this article, I am going to detail exactly how I filed my crypto taxes using the platform.
Before getting started, it probably helps to understand my crypto background. I first acquired crypto at the end of 2017; however, I didn’t sell or trade any of it prior to 2018. In 2018, I traded on Coinbase, Binance, and Poloniex. I didn’t do any mining or gain crypto in any other way outside of buying it from Coinbase. This made my tax profile relatively straightforward.
I started by creating an account on the platform. The tool takes you through a five-step process for generating your required tax reports for the year(s).
In step one, I simply selected my time zone (Central/ Chicago) and selected the exchanges that I traded on over the past two years: Coinbase, Binance, and Poloniex.
I was able to skip the second step of the tool that requires those who received crypto as income from mining or from gifts because I didn’t have any of these types of transactions, therefore didn't have to report any cryptocurrency mining taxes. I also didn’t have to upload any “outgoing” transactions because I didn’t have any wallet fees or purchases using crypto.
The third step required me to upload all of my transactions from the exchanges that I traded on. I used their import guides to learn how to export my trading history from Coinbase, Binance, and Poloniex. For each exchange, I needed to import my historical trades by connecting my account with my API key or by uploading CSV files that my exchanges export.
Getting my trades in was very easy, and I opted to input my API keys so the application could immediately read in all of my trade history. The CryptoTrader.Tax API uses "read-only" access, so it can only read in your trades. It can't do anything with your account.
After uploading all of my transactions into the platform, I was able to review them and make sure everything looked right. I didn’t have any “warning trades”, so I moved onto the final step of generating my 2018 and 2017 reports.
After paying the $49 for my tax reports, I could view my short term losses, net cost basis, and my net gain for the year. The application automated my cost basis calculations for every single one of my trades. This saved me a whole bunch of time trying to hunt down what the price of ETH was when I traded it into BAT etc.
I sent all of these reports and this data to my tax guy. He was able to complete my entire tax return including all of my crypto transactions using these reports.
I also considered using their CSV download that uploads directly into TurboTax online or TaxAct. I have used TurboTax Cryptocurrency for doing my taxes in the past, but ultimately I just ended up giving my CPA these files.
This whole process took me about 20-30 minutes with CryptoTrader.Tax. It was not as hard or as scary as I thought it would be.