TaxBit: A Comprehensive Review

TaxBit, headquartered in Utah, launched its tax reporting software in January 2019. Since then, it has emerged as a key player in the conversation surrounding crypto taxation. The platform offers high-quality services to crypto practitioners, providing them with a swift and efficient means of reporting taxes. In this review, we will delve into the TaxBit platform, assess its effectiveness, and examine its strengths and weaknesses.

What Is TaxBit?

TaxBit serves as a tax reporting tool designed for individuals engaged in the cryptocurrency space who struggle with tracking transactions and calculating taxes. Unlike many other crypto tax software options, TaxBit claims to have incorporated insights from blockchain Certified Public Accountants (CPAs) and tax attorneys during product development. This collaborative approach sets it apart from the norm, where development teams usually consist solely of developers. By involving experts, TaxBit ensures that users remain compliant with current tax regulations and stay informed about future changes.

Thanks to its inclusion of crypto tax experts, TaxBit is able to provide comprehensive cryptocurrency audit trails to its users. This feature allows users to access detailed breakdowns of cost basis and calculations of capital losses and gains, which can be crucial in the event of a tax audit initiated by a CPA or the IRS.

Furthermore, the platform offers automated tax calculation and reporting. It handles the synchronization of transaction data, computes gains and losses, and claims capital losses. This automation is achieved through an API integration system, which swiftly imports transaction data from crypto exchanges and wallets, applies the relevant tax codes based on the user's jurisdiction, and streamlines the process.

It's important to note that TaxBit's services are currently limited to U.S.-based crypto practitioners, operating according to IRS tax codes. The platform is exploring expansion to other countries such as the UK, Canada, and Australia, but currently focuses on IRS guidelines. It even assists users in drafting IRS letters and obtaining tax forms.

Another noteworthy aspect of TaxBit's effectiveness is its integration system. As of this review, TaxBit supports 4,200 cryptocurrencies, commodities, and equities, a wide range of crypto exchanges and wallets, and all fiat currencies. This enables users to seamlessly link their exchange accounts and wallets to the TaxBit platform, automatically processing authorized transactions. In cases where an exchange isn't directly supported, the software offers an automatic CSV conversion tool. However, API integration is recommended for optimal performance.

Additionally, users can access a real-time portfolio tracking tool for supported exchanges and wallets. This tool provides instant tax rate calculations for each transaction on third-party platforms, aiding users in understanding the tax implications of their crypto activities.