I want to explain how to combine multiple crypto tax software in this article.
Using multiple platforms minimizes errors, covers all transactions, and utilizes unique functionalities for different transactions.
This method makes tax reporting more trustworthy and compliant, especially when the cryptocurrencies have several assets and engage in different activities.
What is Crypto Tax Software?
Software developed specifically for managing taxes linked to Bitcoin cryptocurrency transactions is also called crypto tax software.
These tax programs work with different exchanges, wallets, and blockchains to track all your crypto investments and determine how much tax you owe as gains, losses, or income.
With this software, you can obtain tax returns such as Form 8949 and supporting documentation, which you must send to the IRS.
How to Combine Multiple Crypto Tax Software?
Integrating several crypto tax software platforms can assist users in improving their accuracy and the ease of filing taxes. Here are steps outlining how you can go about it:
Data Export and Import: Use one platform to export data via CS or API, then another to import data. TaxBit, Koinly, CoinTracking, and other tax platforms allow importing transaction data from others, which provides a healthy record.
Cross-checking Data: Ensure that those transactions have been made through the other platform and confirm whether there are inconsistencies. This technique highlights gaps or duplicate lines, giving one a better view of their tax payable.
Use Specialized Features: There is more than one software, and each may be good in certain areas, like tax-loss harvesting, NFTs, or DeFi transactions. Understand which works where and use them accordingly.
Consolidate Final Reports: Once reconciled, consider the two integrations separately while filing the final tax file from one software to avoid duplication of records or reports.
The Necessity of the Crypto Tax Software
With the growth of the cryptocurrency industry, regulatory authorities such as the IRS in the US or HMRC in the UK are becoming stronger in controlling crypto tax obligations.
It does not matter whether you are a few dollars long-term investor or a scalper; most countries demand reporting capital gains, losses, staking rewards, and income from cryptocurrencies as part of tax requirements.
However, this tax obligation could be crazily simplified by using crypto tax software, which usually allows automatic data imports, P&L calculations, and reports auto-generated to match the requirements of a particular tax jurisdiction in one country.
These tools remove the headache of crypto tax management by monitoring thousands of transactions over numerous exchanges and wallets at all times.
However, it is not uncommon for such users to use several platforms because they do not find one to satisfy their needs. Thus, several crypto tax software methods become necessary.
Benefits of Combining Crypto Tax Software
Using multiple crypto tax software solutions also has its advantages:
Better Accuracy
Different platforms usually treat and classify transactions differently. Cross-checking information from several software applications improves accuracy in tax reporting.
Holistic Coverage
Specific platforms have their focus, such as DeFi projects, staking, NFT, etc. Using many different instruments may enable you to capture transaction types that one software does not handle.
Less Chance of Loss of Information
Platforms may connect via exchanges, wallets, or blockchains in different fashions. Integrating different modes may help ensure that all transactions occur and that information loss is minimal.
Reduction in Overall Expenditure
If tax-loss harvesting tools or gain-calculating features are used, the expensive expenditure on comprehensive software can be avoided.
Improved Handling of Cross-Border Taxation
Complex foreign transactions require combining software to help incorporate the data with the taxation requirements of different countries.
Using multiple software solutions has specific advantages for complicated crypto portfolios because they deliver detailed, efficiently cross-checked, and trustworthy tax data.
Challenges in Integrating Multiple Crypto Tax Software
Despite the advantages of combining crypto tax software, some challenges come with integrating those systems. Some considerations to take into account include the following:
Data Consistency
A number of systems differ in their approaches to determining gains or losses, which may result in variation. Such discrepancies must be validated on different platforms.
Cost
The use of multiple systems increases costs; this is particularly the case if it is necessary to subscribe to Super Premier for both platforms.
Time-Consuming
Cross-referencing and importing data from different sources is time-consuming, especially for people who have a lot of transactions.
Why Use Several Crypto Tax Software?
Different crypto tax software packages accommodate several exchanges and wallets; however, in some instances, one software might find issues with some requirements.
Here are some reasons why merging more than one crypto tax software can be advantageous:
Improved Coverage
Specific software may be specialized in only a few exchanges or wallets. Using multiple platforms ensures that you do not lose any transaction history.
Consistent Reporting
Accounting applications may have differing approaches to recording profits and losses, e.g., FIFO or LIFO. The combination of tools enables mutual verification of the information, thus enhancing the accuracy of taxes to be paid.
Diversification
Certain features may be better optimized in some software than others, such as facilitating DeFi transactions, managing staking rewards, or NFTs. Using several systems enables users to use the features of each tool.
Safety and Reliability
Getting more than one software can act as more security. Within the reports of one tool, if it is wrong or does not work – there’s always another one that can be checked against it.
Conclusion
Finally, using several crypto tax software solutions simultaneously is an effective way to enhance your tax report’s precision, comprehensiveness, and conformity.
By triangulating data and managing different transactions and features specific to each platform, the chances of making errors and omissions are greatly minimized.
Furthermore, this multi-tool strategy allows the use of each software’s strengths to produce a more comprehensive and dependable tax report.
Where portfolios are complex, using different tax tools to achieve reporting standards is undoubtedly a sensible option.
