Tax season can be stressful for anyone, but navigating the maze of crypto taxation adds an extra layer of complexity. Over the years, several crypto tax software solutions have emerged to simplify this task, but they are not all created equal. They all aim to ease the tax burden but also have significant differences between their features, supported platforms, and reporting capabilities.
TaxBit, one of the most popular free options for individuals, recently announced plans to shut down TaxBit Consumer to focus on its enterprise products. The consumer product will be available to existing users through October 30, 2023, while historical data will be available to download through April 30, 2024.
While TaxBit is referring customers to the TurboTax Investor Center, crypto traders and investors may want to consider a more robust solution as crypto taxes become increasingly complex.
In this article, we’ll look at why TaxBit Consumer users should migrate to ZenLedger, which offers a more robust set of features to help streamline crypto taxes.
Why Use Crypto Tax Software?
The IRS treats crypto assets as “property,” which subjects them to capital gains taxes. Unfortunately, crypto exchanges don’t provide the “done-for-you” forms that investors rely on in the stock and bond markets to complete their taxes. You must compute your own capital gains and losses across your wallets and exchanges – a daunting task in many cases.
Crypto tax software can help automate the process. By connecting with wallets and exchanges, these platforms automatically aggregate transactions and generate the paperwork you must file each year. As a result, they can help you save time and eliminate costly errors while providing an audit trail if the IRS takes a closer look at your taxes.
Many crypto tax software solutions also offer ways to save money on your taxes. For instance, ZenLedger’s tax loss harvesting tool can help identify opportunities to realize losses throughout the year that you can use to offset your capital gains and up to $3,000 in ordinary income. These savings can have a material impact on your after-tax returns over time.
And finally, crypto tax software can help provide support in the event of an IRS audit. While gathering manual records could take months, crypto tax solutions offer ready-made reporting to help you justify every cost basis or capital gain. That way, you don’t have to spend time and money hiring an accountant to make these computations on your behalf.
What Wallets and Exchanges Do You Use?
Different crypto tax platforms offer varying degrees of compatibility with wallets, exchanges, and blockchain protocols. Choosing a crypto tax software provider is critical; your ability to track and report transactions accurately depends on seamless data integration between your software and platforms.
TaxBit supported about 20 exchanges through its API and 55 “self-service” integrations as of January 2023. Self-service integrations don’t include support from their customer service, which means you’re on your own. And, if your exchanges or wallet is “unsupported,” you cannot even add transactions manually or via CSV.
Meanwhile, the TurboTax Investor Center only supports nine exchanges, six blockchains, and seven wallets. While these include many of the most popular options, crypto traders and investors that use anything beyond these may need to consider an alternative solution to automatically import and sync their transactions.
ZenLedger supports all crypto exchanges and wallets via API or CSV integrations. The platform directly integrates with over 400 exchanges, 50 blockchains, and 100 DeFi and NFT protocols – more than any other crypto tax solution. If you don’t see an exchange with an API integration, you can request it, or we’ll help you upload your files!
ZenLedger also makes the import process easier than other platforms. You can search for the wallet or exchange you want to import and receive step-by-step instructions guiding you through the process. But, at the same time, you can upload a custom CSV or add manual transactions if needed.
What Tax Forms Do You Need?
Different crypto tax platforms offer a range of tax forms catering to different taxpayer needs. While many people only require standard forms like Form 8949 to report capital gains and losses, others with more complex financial interactions may require additional forms. For instance, those with foreign financial accounts may need to file an FBAR.
TaxBit Consumer and the TurboTax Investor Center are a free services, so not surprisingly, it only offered basic IRS Form 8949 and Schedule 1 (IRS Form 1040). While these forms are great for the most basic holders, they don’t provide the information needed if you have foreign accounts, gifted crypto assets, or made any other out-of-the-ordinary moves with your crypto.
In contrast, ZenLedger provides a broad array of tax forms, including the following:
- IRS Form 8949
- IRS Schedule 1 (Form 1040)
- IRS Schedule D (Form 1040)
- IRS Schedule A (Form 1040)
- IRS Schedule C (Form 1040)
- FenCen 114 & FBAR
- IRS Form 709
- IRS Form 4684
- IRS Form 14039
ZenLedger also makes accessing and generating these forms easy. In the “Tax” tab, you can quickly see common and critical tax forms and the rare or advanced ones you may need. When you click on the form, you can download it or generate files for popular consumer tax platforms like H&R Block, TaxAct, or TurboTax.
Working with a Tax Professional
Crypto transactions are just part of a broader tax landscape, including employment income, traditional investments, real estate, and other financial activities. As a result, you should ensure that the crypto tax software you use integrates with your accountant’s tools or methods to streamline the entire tax preparation process.
TaxBit was heavily focused on providing high-end solutions to enterprise clients. While its individual-focused tax prep covered the basics, the platform doesn’t provide as many resources for individuals who need to work with a tax professional. Instead, the individual platform integrates with TurboTax to streamline more basic returns.
ZenLedger provides several tools to help you and your accountant better prepare your taxes. For example, one of the most helpful tools is the Grand Unified Account (GUA) spreadsheet, which contains all your imported transactions from different exchanges and wallets. It can help your tax professional easily calculate, visualize, and verify your crypto gains and losses.
If you don’t have a tax professional in your corner, ZenLedger also offers a list of pre-vetted tax professionals to help you file accurately and on time. The processional plans include support for complex transactions like DeFi and NFTs, and you can choose between a 30-minute consultation or complete tax preparation services for one or two years.
The Bottom Line
TaxBit’s plans to shut down its individual product to focus on enterprise customers leaves many of its former clients in limbo. Fortunately, ZenLedger offers a compelling alternative that supports more wallets and exchanges, generates more forms, and offers a broader set of features to ensure that you file accurately and on time.
The platform’s pricing depends on the number of transactions you make annually and the platforms you use. If you have 25 or fewer transactions, you can access all the detailed reports you need for free! And if you have more complex requirements, plans start at $49 per year and move to unlimited transactions with two hours or premium support.
The above is for general info purposes only and should not be interpreted as professional advice. Please seek independent legal, financial, tax, or other advice specific to your particular situation.