Pull a Marty McFly and beam back to 2018 – the term “crypto” is a byword for “scam” and economist Nouriel Roubini is triumphantly calling the crypto space “La-la land.” Fast forward to 2021 and the L.A. Lakers’ basketball arena has been renamed “Crypto.com Arena,” National Football League legend Tom Brady is trading non-fungible tokens (NFTs), and El Salvador has made bitcoin (BTC) a legal tender.
Stephan Roth is a London-based financial journalist who has reported on cryptocurrency since 2018. He has previously worked for KPMG, CNNMoney and ACCOINTING. This article is part of CoinDesk’s Tax Week.
In recent times, the tax industry has made strides in its attempt to understand the industry and flesh out the nitty-gritty tax details that come with a brand-new asset class. However, filing crypto-related taxes can still be an arduous task, with a variety of different forms, calculations and recording of transactions.
That said, a host of young, innovative and ambitious crypto tax companies have risen to the occasion – ready to reduce your tax-related stress before deadline day.
I’ve spent some time going through each company, speaking to key people, analyzing the prices of their products, the number of applications available and using their user interfaces. Here’s what I found.
The bitcoin bug bit Dennis Wohlfarth in 2014 when he was working in Italy as a mechanical engineer servicing Ferrari. Three years later, a group of founders hailing from Germany, Switzerland and the United States fleshed out the blueprint for Accointing.com, and they subsequently launched the company in 2019.
With a European vibe, Accointing offers crypto tax reporting solutions for Australia, Austria, Germany, Switzerland, the U.K. and U.S., ranging between $79 and $299 (plus a free tax report), as well as a portfolio-tracking app and desktop solution. Included in its offerings is a product called Trading Tax Optimizer, which can help users optimize their taxes through tax-loss harvesting and analytics.
Earlier this year, the startup partnered with Swiss-based audit giant BDO Global, bolstering its brand as well as cementing a key traditional tax partner in Europe. “We want our team to bring in their personal touch … so we can expand our tax solutions in Europe and then to the APAC (Asia-Pacific). We want to expand our blockchain connections, NFT and decentralized finance (DeFi) tax support [and] our portfolio features,” Wohlfarth says.
Kickstarted in 2017, CoinTracker is the brainchild of former Google employees Jon Lerner and Chandan Lodha, who have embraced an “engineering-driven culture” and who turned CoinTracker into a unicorn this January, when CoinTracker announced an exclusive partnership with crypto exchange Coinbase, embedding its software directly within Coinbase’s tax center.
“We want to be the layer that helps people interact with crypto and not give them headaches in relation to compliance matters," said Shehan Chandrasekara, CoinTracker’s head of tax
CoinTracker offers four types of tax solutions covering Australia, Canada, the U.K. and U.S. – with tax packages ranging from a free tax report and paid options ranging from $49 to a $159 package. It also provides an “Unlimited” solution that is priced individually.
Another strong suit is the company’s enterprise solution, with the “biggest players” in the market looking to do business with CoinTracker.
Rounding up its offerings is a portfolio tracker that provides exclusive insights into a user’s holdings and allows the user to tax-loss harvest and track NFTs and DeFi transactions.
This year is going to be big for CoinTracker, Chandrasekara said. “We will continue to hire aggressively and listen to our users. We expect to reach 1 million-plus users on the platform during [this] tax season,” he said.
CoinLedger – formerly CryptoTrader.Tax – was born of necessity in 2017 because David Kemmerer, Mitchel Cookson and Lucas Wyland were looking to report “over 120,000” trades made through arbitrage investing. “We were pretty frantic,” Kemmerer, the CEO, says. "There was nowhere to report our taxes, so we had to fix the problem ourselves.”
Tasked with figuring out how to report its own holdings, CoinLedger had to develop the “picks and shovels” for its tax tool, releasing the first version of its tax platform in spring 2018.
Read More: US Crypto Tax Guide 2022
Since then, CoinLedger has built a tax tool offering geared toward the U.S. market, allowing users to tax-loss harvest and benefit from its TaxAct feature – helping users navigate tax season. Prices per tax offering range from $49 to $299, with the most expensive solution allowing reporting for an unlimited number of transactions. It also offers a business-to-business (B2B) solution, helping certified public accountants (CPAs) serve their personal clients.
Back in December CoinLedger partnered with crypto broker and portfolio tracker Voyager, and in 2022, it is looking to launch NFT tracking for its portfolio and release more portfolio tools for its free portfolio-tracking solution. “We want to reduce the friction for participating in crypto, so we’re focusing on our analytics reporting and making sure we get the data right,” Kemmerer said.
Starting out in their parents’ basement, Austin Woodward and his brother Justin Woodward founded TaxBit. The brothers quickly realized the tax burden crypto traders could face following the crash in 2017. “They realized that there was no way this industry [crypto taxes] could go mainstream and be compliant unless people could accurately track their investment,” said Michelle O’Connor, the company’s vice president of marketing.
TaxBit offers tax services for individuals ranging from a free offering to paid offerings ranging between $50 and $500. It also provides enterprise and government solutions, helping both companies and regulatory bodies remain tax compliant, assisting them to better understand the crypto space. It also offers a portfolio-tracker app, providing key insights into users' holdings as well as the TaxBit network, where users of member companies can access free tax forms. And it looks to “gamify” crypto taxes through its tax optimization feature and its one-of-a-kind NFT dashboard and tracking service.
“[In 2022] we’re going to continue to iterate on DeFi and NFTs, we’ve had a tranche of partnerships that are ready to launch, and we will also focus on our public sector,” O’Connor said.
TokenTax CEO Zac McClure’s life is pretty “eclectic.” Starting off at JPMorgan, he found himself teaching math for Teach for America before embarking on a journey to Zimbabwe to help locals there learn more about personal finance. Following a stint at Imprint Capital where he wrote the firm's investment thesis for Ripple, McClure said, “I fell in love with crypto and I had a finance and accounting background, then markets exploded [in 2017] and friends everywhere asked for my help to figure out their taxes.”
Come 2017, TokenTax was operational for retail investors, and it now offers four crypto tax report plans, covering Australia, Canada and the U.S. with prices ranging from $65 to a $3,500 VIP package offering IRS audit assistance. It also offers specific services for margin trading and tax-loss harvesting.
“We are expensive, but we solve the most difficult problems. If the other software doesn’t work for you, you go to TokenTax,” McClure said. TokenTax has also been active in its collaborations, joining forces with eToro, Binance and Crypto.com. Staying true to his teaching roots McClure said, “[In 2022] we want to expand our wallet integrations, teach people about taxes and take some of the tax stress off people’s shoulders.”
Pat Larsen, ZenLedger’s CEO might be as "stars and stripes" as it gets. Serving in the military as a helicopter pilot and with two tours of duty under his belt, Larsen got an MBA from the University of Chicago before becoming an investment banker. Noting that the nascent crypto industry would require traders to pay taxes, Larsen said that he believes that “the point of tax services is to take you from a state of stress to a state of calm. It’s to get the numbers right.” Hence the name ZenLedger.
Current U.S.-focused tax offerings include a free tax reporter for up to 25 transactions and products that cost $49 to $399. The company also provides specific NFT and DeFi support with professionally prepared tax plans that range in price from $195 to a $6,500 two-year tax plan. Additionally, a tax-loss harvesting tool is available for users as well as a direct Turbo Tax integration. Partnerships include one with digital asset management company Valkyrie and eToro.
When asked why people should pay crypto taxes, Larsen said: “If you are a U.S. citizen, you should avoid being a felon. The sheriff will come and have a gun on his hip.” In terms of ZenLedger’s outlook for 2022, Larsen said, “We want all hands on-deck and what we built is a powerful offering. The pace of development will also accelerate.”
Aiming to turn the lethargic traditional tax industry on its head, these young guns have taken it into their hands to do the hard thinking for you. Whether that be figuring out how to track coin transactions across DeFi platforms, understanding how to tax NFTs or how to automate tax reporting – the crypto tax tool industry has had to wrap its head around some of the biggest challenges that have come with the rise of crypto.
At the end of the day, hate them or love them, you’re going to have to pay your taxes. No matter if you’re coding solidity at Ethereum or playing with that 100 times leverage on Binance’s margin trading platform – government regulators will be looking to tax your crypto transactions. So, give these tax companies a few minutes of your time and avoid a sticky situation on tax deadline day!
Further Reading from CoinDesk's Tax Week
Crypto won’t save you from taxes, but it may eventually make them easier to pay, says futurist Dan Jeffries.
Tax guidance lags innovation. So does tax software. Meanwhile, misconceptions abound. If not careful, investors can end up owing more tax than expected and having to unload crypto to pay the bill
Investors in MicroStrategy, Tesla, Block and Coinbase need to consider how wild price swings will affect results, not only directly but indirectly due to complex tax accounting rules.