- What is the difference between CoinReporting and other Bitcoin or digital currency accounting software?
- Is CoinReporting a tax calculation tool?
- If I bought a Lifetime License back in 2013 or 2014, will it still be honored?
- I'm scared of giving you access to my personal financial data. Is there a desktop version that I can install on my own computer?
- Do you report anything to the IRS?
- What exchanges do you support?
- How does Bitcoin (and other digital currency) taxation work?
What is the difference between CoinReporting and other Bitcoin or digital currency accounting software?
CoinReporting was designed from the ground up as a feature-complete accounting system for businesses and individuals alike. It fully supports double-entry bookkeeping, has a functional General Ledger, and can generate all the reports you'd expect from an accounting system.
We expect that businesses that exclusively utilize digital currencies will be able to use CoinReporting as their sole bookkeeping system.
For the rest of the business world that still uses fiat currency, CoinReporting was designed to play nice with other accounting systems, such as QuickBooks and Xero. CoinReporting can export all of your transactions in .qbo format (including all exchange rate capital gains/losses as calculated) so all your digital currency transactions can live inside your main QuickBooks records along with the rest of your books.
Is CoinReporting a tax calculation tool?
Yes, CoinReporting can calculate capital gains from digital currency transactions and generate reports that will allow you to file your taxes. CoinReporting supports short and long term holding periods, FIFO/LIFO/HIFO tax strategies, and crypto-to-crypto transactions (all tracked in your base currency).
Our internal database of market data for Bitcoin and all main altcoins allows us to automatically calculate the cost basis and capital gains and losses associated with an income or expense transaction where a vendor was paid or income was received directly in cryptocurrency.
Furthermore, since all transactions are stored internally using industry standard double entry bookkeeping, CoinReporting can generate exports that work natively in other accounting packages such as QuickBooks.
CoinReporting's tax tool does not assume that you are located in the United States. It allows you to define the holding period cutoff for short term vs long term, as well as choose the basis calculation strategy (FIFO, LIFO, or HIFO) that is the best usable choice within your jurisdiction.
For our United States-based customers, CoinReporting can generate a Capital Asset Disposition report in the exact format required for IRS Form 8949.
If I bought a Lifetime License back in 2013 or 2014, will it still be honored?
Yes! Even though we no longer sell the lifetime license, we are committed to honoring lifetime licenses (and 1-year and 2-year purchases) that were made in 2013 and 2014.
I'm scared of giving you access to my personal financial data. Is there a desktop version that I can install on my own computer?
Unfortunately, we only offer CoinReporting as a hosted Software-as-a-Service. Here's why. First, CoinReporting was designed with large businesses in mind, and many of these businesses store literally millions of transactions every month. To be able to support that type of volume requires heavily optimized databases that run on dedicated hardware.
Secondly, being a SaaS also allows us to offer continous rolling feature additions, such as support for new exchange and altcoins, at a quick pace. On a more practical note, CoinReporting's founding team has decades of collective experience developing SaaS products, and none of us have ever built desktop software.
With that said, we understand that a justifyable amount of paranoia exists toward United States-based corporations in the digital currency space. It is possible to use CoinReporting quite anonymously. We do not require that you register with your real name or provide your physical location, and we accept payment in Bitcoin. We do not log your IP Address, and we support access via proxies, VPNs, and Tor.
Do you report anything to the IRS?
No! CoinReporting is a tool that you can use to prepare your taxes, however, we are not a filing tool and we do not report any of your information to anyone.
What exchanges do you support?
You can see the full list of exchanges that can be used with CoinReporting on our Supported Exchanges page.
We intend to support any cryptocurrency exchange or merchant processor that you use. You can see the list of exchanges we intend to support in the future on our future exchanges page.
And of course, our process for manually entering trades was designed to be as quick and efficient as possible. For example, one of our founders often makes manual trades via SecondMarket, who doesn't provide any sort of website or API at all for tracking trades. He uses the manual Transaction entry in CoinReporting to record and track these transactions on his side.
How does Bitcoin (and other digital currency) taxation work?
The specific answer to this question depends highly on what country you pay taxes to. There are two ways digital currencies might create a tax liability for you.
If you sell goods or services and receive digital currency as payment, you are still receiving income, despite the fact that the payment is made in a digital currency. For tax purposes, the digital currency amounts should be coverted to your local currency using the prevailing exchange rate at the time of the transaction and reported as income on your personal or business taxes.
CoinReporting is able to perform this calculation automatically and show you all your ordinary income (from the sales of goods or services) in your base currency, even if it was actually paid in Dogecoin or Yayacoin.
If you sell digital currencies, or use them to pay for goods or services, and your country treats digital currencies as a capital asset, you also record a capital gain or loss based on the value of the digital currency at the time you sell or spend it.
The capital gain is the difference between the price you bought the currency for and the price you sold it at. For example, if you bought 1 BTC for $300 and sold it for $400, that would be a capital gain of $100. If you bought 1 BTC for $300 and then spent it on some equipment, that's still a capital gain of $100 if BTC was trading for $400 at the time of that purchase.
In the United States, all digital currencies are currently considered by the IRS to be personal property, so this applies to you.
Combining both examples, if you received 1 BTC for services rendered and 1 BTC at that time was trading for $500, and then you spent that 1 BTC for supplies when BTC was trading for $300, you'd have the following:
$500 - Income, Services
($300) - Expense, Supplies
($200) - Capital Loss, 1 BTC purchased for $500, sold for $300.
CoinReporting is able to automatically calculate the capital gains and losses associated with any transaction, even if it's an income or expense transaction, and present you a Profit and Loss statement that looks like the one above.
For businesses that receive payment in Bitcoin and also pay vendors in Bitcoin, accounting software like CoinReporting is a literal must-have in order to even understand your actual profit and loss on the transactions, not to mention being able to report it to your tax authorities.
Each individual trade on an exchange counts as its own buy or sale for tax purposes. When Mt. Gox breaks up your transaction into 1,000 tiny transactions that all fill at slightly different prices, those transactions all need to be tracked individually. CoinReporting was built to scale to handle millions of transactions and can easily handle outrageously large sets of trade data.
If my taxing authority hasn't told me exactly what to do, and no exchange has sent me any forms, why should I file anything with anyone?
In many countries, digital currency taxation is still very murky and based on unclear or no guidelines. With that said, most taxing authorities do not take kindly to taxpayers who use that as a license to ignore the law entirely. We believe you should use your best judgement and file your taxes as best you can. That way you can always establish that you acted in good-faith.
If you fail to maintain proper records and file your tax return properly, you may be in a tough situation if you do get audited. In fact, we believe that you run a considerable risk of having any bitcoins received classified as income (with a cost-basis of $0) as opposed to a capital asset disposition. This might result in even loss-making trading transactions being counted as income.
CoinReporting makes doing things the right way easy and fast. Just do it.