Although they are potentially confusing, cryptocurrency taxes come with the territory of buying, selling or trading cryptocurrencies such as Bitcoin, Ethereum or Solana. Whether you’ve filed these taxes on your own or you’ve sought out the help of a professional, leaning on the right software can make a huge difference in the process. 

Although there are many cryptocurrency software options on the market, you may not be aware of the benefits that accompany them. Here are only a few reasons to consider using software to help you calculate your upcoming cryptocurrency taxes.

Compiles Data Across Sources

Every time you sell, trade or dispose of your cryptocurrency, it requires standardized, organized data for reporting your taxes. While this may not seem like a huge undertaking, it can be time-consuming to sift through hundreds or even thousands of transactions one at a time to collect the appropriate data from all of your cryptocurrency sources. 

When you use cryptocurrency software, it automatically pulls the relevant data from all of your cryptocurrency transactions and organizes it. This collection occurs across data sources including wallets, exchange accounts, staking rewards and airdrops. 

Establishes Digital Asset Price

Once the above data has been aggregated, cryptocurrency software establishes the cost basis and holding period of your cryptocurrency assets. These two pieces of information are essential in determining your taxable income generated from your cryptocurrency transactions.

Tracks Portfolio Performance Throughout the Year

If you’re curious about how your cryptocurrency portfolio is evolving at any point in the year, you can refer to your portfolio performance dashboard within the cryptocurrency software. This provides you with real-time insights into your potential tax liability. Portfolio dashboards are a great way to increase visibility and reduce the chances of being blindsided by unexpected liabilities when your taxes are due. 

Assists In Implementing Tax Minimization Strategies

Taking the above dashboard one step further, cryptocurrency software provides you with insight into which tax lot ID method can minimize the tax impact of your cryptocurrency activity. 

For example, tax-loss harvesting is a strategy designed to limit the recognition of capital gains. In tax-loss harvesting, securities are sold at a loss to offset taxes on recognized capital gains. 

Other tax lot ID methods include LIFO (last in, first out), FIFO (first in, first out), and HIFO (highest in, first out). By leveraging the offerings in the software, you can use Specific Identification to determine the most advantageous tax lot ID method for your activity. 

Schedule a Complimentary Assessment with Founder’s CPA

Our team of cryptocurrency experts understand that navigating cryptocurrency taxes can be overwhelming and complicated. The easiest way to file your crypto taxes is by working alongside one of our knowledgeable team members.

We encourage you to take advantage of our complimentary consultations to learn more about how we can help you during this upcoming tax season and beyond!

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Crypto
Curt Mastio
Post by Curt Mastio
Dec 1, 2023 2:06:35 PM
Curt Mastio started Founder’s CPA in 2017 and currently serves as the Managing Partner of the firm. After obtaining both his Bachelor’s and Master’s degrees in accounting from the University of Illinois in Urbana-Champaign Curt started his career in Big Four public accounting. Shortly thereafter Curt served as the Chief Financial Officer of Storage Squad began his stint as an Adjunct Instructor at Northwestern University’s Farley Center for Entrepreneurship and has been teaching Accounting & Finance to undergraduate students for 6+ years. In his current role Curt oversees strategy, operations, and business development at Founder’s CPA. Further, Curt has experience working directly with 200+ startups and small businesses providing accounting, tax, and outsourced CFO services. His industry expertise lies in the SaaS, Blockchain, Marketplace, and Fintech industries. He has served as a key advisor working directly with startups that range from pre-revenue to companies generating over $30 million dollars a year in revenue. Lastly, he serves a key role working directly with the firm’s clients that have collectively raised over $200 million in venture capital funding to date. Curt is also an active advisor, mentor, and investor in the startup ecosystem. He has facilitated numerous workshops, webinars, and presentations to incubators and other startup-centric organizations. He is also an active mentor for Techstars in both Chicago and Iowa. Outside of his daily professional duties Curt is actively involved with Beat the Streets Chicago and was a founding member of its Young Professionals Board. His efforts in both leadership and community involvement were recognized when he was awarded the Illinois CPA Society’s Outstanding Young Professional Leadership Award in 2020. He was also a panelist at their annual conference in 2022 where he spoke about his experiences starting and operating a public accounting firm. He maintains an active Certified Public Accountant designation that he obtained in 2014. Outside of work, Curt can be found spending time with his friends & family including his dog Rufus. His hobbies include golf, boating, cooking, reading, and attending sporting events & concerts.