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Hey folks, let me once again preface that I am not a financial advisor and this is for entertainment and educational purposes only. In addition, I am definitely not a CPA or a tax professional--this is only really gives an account of my experiences using Koinly.
I hate taxes.
And what I hate even more, is trying to figure out my taxes for cryptocurrencies. This unfortunately, was the first year where I was required to do mine. The years prior I simply just bought crypto with fiat and did a lot of hodling which thankfully according to the doesn't require disclosure. 2021...was a different story altogether. I think it was around February or March of 2021 when I started doing some regular trades, mainly with ETH and BTC that I had bought (and incidentally had forgotten that I had bought) back in 2018. Looking back at some of the trades I remember initially thinking that the IRS wouldn't care because I was essentially making crypto trades with other crypto. But...reading the fine print, virtual currency to virtual currency transactions are unfortunately considered taxable events.
Submitting 1099's alone probably isn't going to cut it.
My initial plan was to just submit only the 1099's that I received in all the exchanges that offer them, namely the big hitters like Blockfi and Coinbase. I thought (erroneously) that well...I could just submit those because those are probably the easiest for the IRS to track, and that alone would cut it. But then just uploading those into Turbo Tax and it was very apparent very fast that it would not, because there were too many open-ended transfers in and out of them, making it appear that my "proceeds" were far, far greater than anything that I actually realized.
Especially for my Blockfi 1099, Blockfi couldn't discern where some of my initial BTC/ETH came from, so then it couldn't calculate my actual realized gains so it listed the entire amount as my proceeds. I realized from these errors that I needed to submit my entire transaction trail, or else, find a different program that could accurately capture my gains and losses. Submitting 1099's alone made it seem that I made a LOT more than I actually did. Therefore, I knew that I had to find somewhere that was going to help me track all this stuff because I sure as hell was not going to manually go through the 1000's of transactions I've had over the past year.
Want to give a crypto trader a panic attack? Tell them to fill out an 8949 by hand.
For those of you unfamiliar with form 8949, it's essentially crypto tax form where you report your taxable income on crypto staking, trading or mining. Now at this point, I was already planning on going through Turbotax because that's what i've been using for the last decade, so I really just needed a program that would help me generate an accurate form 8949. This is when I started to get a headache. There are so many different crypto tax options out there now that I found it a bit overwhelming, and it wasn't helpful that every other BRAVE Ad I was getting while I was searching was for another Crypto tax program.
Good for people who have done a lot of transactions: If you've done several hundred trades in the past year, I hope that you're not figuring out and entering everything manually. Or in other words, I hope that you value your time more for than what you're giving it, because man...I can't imagine what a pain in the ass that must be. And as cheap as I am sometimes, this was an absolute must of whatever program that I was going to choose--I needed a program that was going to automatically aggregate all my data for me to figure out what I gained or lost. Call me lazy, but I didn't want to open a single excel or do any math.
Speaking of being cheap, they do have some pretty competitive pricing plans, especially for the people that have a crazy amount of transactions:
I'll get into this a little bit later, but I would recommend that even if you use another program for your crypto taxes, that you open a free account just to get a pretty good snapshot of your entire crypto portfolio. If you use zapper or debank, then you'll appreciate that it not only lists all your assets, but Koinly will tell you the gains and losses of your assets as well too!
If you've never done crypto taxes before like me, you need to report your transactions/sales/gains/losses on each wallet/exchange that you have. So for instance, if I moved 1 BTC from Blockfi to my Metamask, and then later to KUCOIN to trade my BTC for ETH, that means that all this transactional data should be reported to Koinly for them to track accurately what your gains/losses may have been.
For each wallet exchange, you normally have more than one option of how to report that data--either have it read through syncing/API, or imported from a file (usually a csv file). I found out real quick that this was a problem, because some wallets (like Voyager) don't have an easy way to load your transactional data, you actually have to get an e-mailed request through the app. But I think this is what really put Koinly to the top for me--For each wallet/exchange you're trying to connect to Koinly, they have an in depth instructional video of how to do so with each one.This is something I thought was insanely helpful, because for each wallet/exchange, there may be some totally different way of how to obtain a csv of your transactions or your API keys.
Also, one final note, Koinly supports a ton of countries. Over 100 in fact. If you need to look up a specific one, check out an abbreviated list of the most popular ones or else you can e-mail them directly at [email protected] to find out.
What about Cons for Koinly?
1) There is no NFT support: now this didn't matter so much for me because I didn't sell or trade any NFTs this past year, but if this is important to you, I know there's many other programs like, tokentax.co that I heard are pretty good with tracking all that stuff.
2) There is no support for the Terra ecosystem. However from what i've been reading on multiple reddit blogs, there is little support for Terra via tax reporting anywhere. (If someone has a good way to do this, please let me know!)
Wrapping it up...
At the time of writing this, I still haven't completed my taxes via turbotax yet. Procrastination is a powerful force isn't it? I'm actually only writing this article so that I don't have to do my taxes right now. Did Koinly reduce my anxiety? Absolutely. Are there possibly other programs out there that are better aggregating all this data? Probably. But like I said, I hate taxes. And there's no way in hell i'm going to redo what I've already done this year. Maybe next year.
If you've enjoyed reading this article and want to support the blog, feel free to use my affiliate link for Koinly: https://koinly.io/?via=9412B5B5
Otherwise, if you have any other recommendations or experiences with other programs, feel free to comment below, I would love to know.
