Mastering Crypto Tax Compliance

How to Pick Crypto Tax Software

March 16, 2023

As the cryptocurrency market continues to grow, so does the need for accurate and efficient tax reporting. With the IRS now requiring cryptocurrency transactions to be reported on tax returns, it's more important than ever to choose the right crypto tax software to help you navigate the process.

But with so many options available, how do you know which one to choose? Forbes spoke with experts in the field to get the inside scoop on what to look for in a crypto tax software and how to make the most of your investment.

First and foremost, it's essential to consider the software's compatibility with your specific cryptocurrency exchanges and wallets. "Make sure the software can connect to your exchange and import your transactions," advises certified public accountant (CPA) and cryptocurrency expert, Daniel Woolley. "This will save you a ton of time and reduce the risk of errors."

Next, think about the type of tax reporting you need. Do you need to report capital gains, ordinary income, or both? Some software programs, like TurboTax, offer built-in support for cryptocurrency transactions, while others, like TaxAct, may require additional add-ons.

Another crucial factor to consider is the software's accuracy and reliability. "You want a software that can accurately track your transactions, including those pesky wash sales and short-term vs. long-term capital gains," notes cryptocurrency investor and trader, Alex Kruger. "A small mistake can lead to big problems with the IRS."

In addition to accuracy, consider the software's user interface and customer support. "You don't want to be stuck trying to figure out how to use the software at tax time," warns CPA and cryptocurrency expert, Chris Yim. "Look for software with a user-friendly interface and 24/7 customer support."

Finally, consider the cost and any additional fees. Some software programs, like Credit Karma Tax, offer free filing options, while others, like TaxSlayer, may charge a premium for advanced features.

In conclusion, choosing the right crypto tax software can be a daunting task, but by considering compatibility, tax reporting needs, accuracy, user interface, and cost, you can make an informed decision and ensure a smooth tax filing process. Whether you're a seasoned investor or just starting out, taking the time to choose the right software can save you time, stress, and potentially even a headache or two with the IRS.