The boom of cryptocurrency has opened up a plethora of new investment opportunities. However, managing crypto taxes is still a challenge. With the growing complexity of the crypto market, traditional tax filing methods are simply not enough.
Let’s look at how Koinly, a software program designed to streamline crypto tax reporting for all kinds of users, explores automated data collection and ensures accurate tax calculations.
What Is Koinly?
Koinly is a software program that helps users with cryptocurrency tax reporting. It can handle various activities like buying and selling crypto (trading), earning crypto through solving complex math problems (mining), holding crypto to earn rewards (staking), and receiving free crypto distributions.
This program is designed for both individual investors and professional accountants who work with crypto investors. Koinly simplifies the process by automatically fetching transaction data from exchanges and wallets once provided with access keys.
It then calculates market prices, identifies transfers between the wallets (which are not taxable events), and determines the profits or losses on crypto transactions. Finally, it generates reports that can be used for tax filing.
How to Use Koinly
Koinly simplifies cryptocurrency tax calculations by gathering your transaction data. There are two ways to add your information:
- API Keys: You can grant Koinly access to your wallet data directly through secure API connections.
- CSV Files: You can export your transaction history from your wallet as a CSV file and upload it to Koinly.
Once imported, this platform automatically categorizes your transactions. For tax filing purposes, it generates reports you can export, which requires buying a plan on the platform. You can use these reports with other tax calculation software or manually when filing your taxes.
Depending on your location, Koinly may even produce completed tax forms. Koinly offers extensive compatibility for crypto tax reporting with integrations exceeding 6,000 cryptocurrencies, 350 exchanges, and 50 wallets.
Koinly Features
Koinly has several useful features and tools. The most prominent ones are as follows:
1. Accurate Tax Calculations
Koinly incorporates a robust error-checking system to identify issues like potential missing transactions, which could lead to huge tax penalties. This ensures the tax calculations are based on complete and accurate crypto activity. Additionally, the platform uses secure API connections to automatically verify all data imported directly from your exchanges. This eliminates the risk of manual entry errors and saves time during filing.
2. Comprehensive Support
Koinly supports a wide range of cryptocurrencies, exchanges, and wallets. It is compatible with over 6,000 cryptocurrencies, 350+ exchanges, and 50+ wallets and allows you to consolidate all your crypto activity from various sources. This eliminates the need to manage multiple platforms and provides a comprehensive view of your complete portfolio for seamless tax reporting.
3. Portfolio Management Tools
Various portfolio management tools on Koinly provide valuable insights into your crypto holdings. It is easier than ever to track the value of the crypto assets over time, including both realized (already taxed) and unrealized (yet to be taxed) gains and losses. This detailed performance tracking lets you make informed investment decisions and enhance your trading strategies.
4. Tax Optimization Strategies
Koinly goes beyond simple tax calculation by offering tax optimization strategies, like tax-loss harvesting. This powerful feature helps you identify opportunities to strategically sell crypto assets at a loss to offset taxable gains from other holdings. This can potentially reduce your overall tax burden and save you money during the tax season.
5. Simplified Data Entry
Manual data entry is eliminated with Koinly as it streamlines the process with automated data imported directly from popular exchanges. This allows a seamless import of transactions with just a few clicks, saving hours of time and frustration during tax preparation.
Pricing Plans
1. Free Plan
This pricing plan is perfect for beginner investors in crypto as it allows basic portfolio tracking, including viewing the real-time market value of your holdings over time. You can connect an unlimited number of wallets and exchanges, and it will calculate capital gains for up to 10,000 transactions. It also supports various transaction types like DeFi, margin trades, futures, and avalanche trades. However, you cannot file taxes with this plan.
2. Newbie Plan
This plan is a step up for those who want to file their taxes. For an annual fee of $49, you get all the features of the free plan, plus the ability to generate tax reports for different countries, relevant tax forms like Form 8949 Schedule D, and a comprehensive audit report. However, this plan only allows you to file taxes for up to 100 transactions.
3. Hodler Plan
This plan is ideal for users with more frequent crypto activity at just $99/year, allowing you to file taxes for up to 1,000 transactions in a year. It includes everything in the Newbie plan, making it a good choice for those who need to handle more transactions but don't trade at a high volume.
4. Trader Plan
Designed for professional traders, this plan offers features to handle high-volume trading activity. The price starts at $199 per year and allows you to file taxes for 3,000 transactions. You get all the features of the other plans in addition to expert email support from Koinly's team to answer your crypto tax questions. If you need to handle even more transactions, Koinly offers higher transaction limits for an additional fee.
Conclusion
Koinly simplifies complex tax reporting process for cryptocurrency investors. With support for a vast array of currencies, exchanges, and wallets, Koinly allows users to consolidate all crypto activity in one place. The tiered pricing plans cater to different needs, from beginners to high-volume traders. The ever-evolving world of cryptocurrency software means new features are added regularly to stay up-to-date in the crypto tax reporting market.
