- >Crypto.com Experiments with Free Tax Reporting Software
Crypto.com Experiments with Free Tax Reporting Software
With each passing month, it seems like Crypto.com is becoming more and more diversified. The latest addition to their value offering is a free tax-reporting service on the domain tax.crypto.com.
The service is currently in BETA and only available for Canadians. Nonetheless the existence of this platform is a sign of good things to come. It further signals Crypto.com’s adherence to regulations set forth by world governments.
Keegan Francis | Apr 27, 2021
Crypto.com Preempting Reporting Requirements
In the world of cryptocurrency, image matters, and Crypto.com has put a lot of effort into refining it. Most notably, they’ve implemented industry leading security standards, and secured a record breaking amount of insurance for their platform.
Now, in order to seemingly preempt exchange reporting requirements in Canada, they’re providing their users with a way of automating their tax reports. This sort of thing comes with mixed feelings from the crypto community. On the one hand there is a strong undercurrent of rebellion against government and taxes. On the other hand, there are those that recognize mass adoption isn’t likely to take place without cohesion with the authorities.
The launch of their tax platform comes welcome to most. Alternative tax reporting platforms like Koinly cost money to use on a yearly basis. It appears that Crypto.com aims to make a name for itself among other crypto exchanges by making it possible to process their transaction history.
Even though almost every exchange makes it possible to export your history, only Crypto.com has come out with their own tax analysis platform. This says a lot for the reputation of Crypto.com in the eyes of government and tax authorities.
The Canada Revenue Agency Asks CoinSquare for Client Data
The Canadian Revenue Agency (CRA) has asked another Canadian cryptocurrency exchange called CoinSquare to report on its users. Specifically, the CRA has asked for information on anyone holding more than $20,000 on the platform. Additionally, the CRA would like to know more information about the top 16,500 users of the platform. Head of audits Ted Gallivan said that this was the first exchange to be looked at, but not the last.
The CRA has requested the above information from CoinSquare dating back 7 years. This ultimately means that CoinSquare, along with any other cryptocurrency exchanges must keep pristine records. Yes, the blockchain data permanently exists, but client data is a separate issue that exchanges must manually collect. Exchanges have been subject to increasingly stringent reporting requirements ever since the QuadrigaCX scandal in 2018.
What does the Crypto.com Tax App Do?
Furthermore, if you’re using non-custodial wallets, then it can also analyze the transaction history of them. So you simply plug in your Bitcoin and Ethereum addresses, and let the tax software do its job.
With respect to the exchange data, it analyzes your withdraws, deposits, trades, and whatever passive income you’re making on the platform. In the end, it’ll typically spit out two numbers. The first is income, and the second is capital gains or losses (hopefully gains!).
Then with the address data, tax software typically uses something called “chain walking algorithms”. These are algorithms that are designed to follow the trail of addresses connected to the one you provide to them. It builds a map of addresses that you own, and attributes tax information to the transactions it finds.
Sometimes, you will be asked to provide additional context to transactions found within your Ethereum or Bitcoin address. Some transactions may look like withdrawals, but are actually deposits. Some deposits may look like transfers, but are actually income. It is up to you to categorize transactions correctly, as this will have an effect on the numbers the tax software provides.
Will the Crypto.com Tax Software Come to Other Countries?
While the platform offers “full support” for Canadians, the banner at the top of tax.crypto.com declares that more jurisdictions are coming.
The main reason why they cannot just release the software for other countries, is because every country has a different set of rules for reporting crypto taxes. For example, Canada requires that capital gains are calculated using the average cost basis of your investments. While in Germany, if you hold your cryptocurrency for more than 1 year, you don’t need to pay any capital gains tax.
While no official statement from Crypto.com has been released on which jurisdiction is next, it is likely they will focus on where the majority of their customers are located. That is, Singapore, European countries, and the United States. Unique rules need to be written for each country and jurisdiction. There’s a good chance the United States will be next consider the customer base.
Check out Koinly for More Jurisdictions
If you’re one of those people who likes to be prepared for tax season, and you don’t live in Canada, then you’re going to need to look at other options.
Here at CryptoVantage, we can recommend you check out Koinly.io. This is another tax reporting software that is ready to go for virtually every tax jurisdiction in the world. On top of taxes, they also provide you with a high level view of your portfolio, as well as a ton of configuration options for how your taxes are calculated.
Koinly offers a range of different reports that just aren’t available yet on Crypto.com. You can see income reports, capital gain reports, and assets reports which simply tell you your balance of assets at any given point and time.
You can check out all the different options on our crypto tax software roundup.
What to Know When Reporting Crypto Taxes
There are a couple of things to keep in mind when reporting crypto taxes. The best thing you can do is to keep good records.
For starters, keep a record of all the exchanges you’ve ever used. Next, make sure you record each and every address that you’ve transferred funds to and from. Most tax reporting software will be able to process your transactions if you’ve recorded this much.
However, if you’re using an obscure niche blockchain, remember to record four pieces of information for every transaction. The time of the transaction, the assets involved, the prices of the assets at the time of the transaction, and any fees that were paid.
For more information, check out our article on how to prepare for crypto tax season.