Everyone who invests in cryptocurrency knows that there is a tax implication for every trade. It is important to keep track of all the details related to each transaction and record your taxable gains and losses on the gains report. The tax laws surrounding cryptocurrency are rather vague and it will be a long time before the tax authorities devise a complete system that can be applied to cryptocurrencies. Investing in cryptocurrency is similar to investing in stocks and businesses and you will have to pay taxes on your gains from both short term trading of cryptocurrency as well as long term investment. The capital gain for securities is treated very differently than most other capital assets.
1. To keep your records with respect to transactions involving cryptocurrency :
Crypto tax software helps keep your records for accounting and taxation purposes. It tracks all trades of the cryptocurrency you hold and can draw a complete record showing the amount of each token you held on a date. The various gains from trading through your best crypto tax software can be broken up into short term and long term capital gains in line with federal regulations.
2. To keep track of your profits and losses :
Real life investors need to keep track of assets they hold and their profits and losses. This is especially difficult in the world of cryptocurrencies. One needs to keep track of each trade that has been made on a personal ledger with their crypto tax software. Some traders have found it best to combine their crypto tax software with a ledger and then compare the results against each other at the end of every business day.
3. To calculate the capital gains and trading gains in cryptocurrency :
This is a complicated area that you need some help to understand. It involves calculating each exchange of coins as well as short term and long term states. Holding cryptocurrency for more than one year makes it a long term investment. You can also hold cryptocurrency opportunities under a trading account which will have much shorter holding periods of less than one year.
4. Merging your trades together and getting a complete picture :
You will be able to combine your trades into a single figure that you can then use in your tax returns. This will give you a reasonably accurate picture of your profits and losses on a day to day basis. This is especially useful to those traders who are not capable of keeping track of the volumes of their trades in the very short periods involved.
5. Getting more insights from your trading :
This is possible by integrating your tax on cryptocurrency with platforms that can provide you with charts and signals which can ultimately help you increase your profits. It is possible to pretty much use some kind of crypto tax software for any tradable instrument.
6. Improving your tax filings :
Crypto Tax software is designed to help traders in not only filing their tax returns but also helping them with their accounting needs. It will help you keep track of your gains and losses, it will assist you with the planning of taxes and it will provide you with a complete record for the purpose of taxation and auditing of your trading activity.
Binocs is a tax software tool which helps users track the gains and losses on their trades. It also has a portfolio tracker so that users can track their portfolio performance over time. Users can import their trading history from other cryptocurrency exchanges as well as manually enter their trading details in case the platform does not have the relevant data for a particular trade.