Breaking from the reviews with common thread, I decided to post this review early because it’s tax season in the US. There has been a lot of discussion lately about how it works and where to find more information. I wrote some time back about Bitcoin and paying taxes in the US, but said I would wait until I did my own taxes before posting a review. I’ve successfully completed my returns and, with this year’s deadline being Monday, April 18th, we’re coming down t to the wire.
The 2015 tax year is the first year I’ve sold bitcoin or paid for anything with bitcoin, so it will be the first year I’ve had to pay taxes on my capital gains and losses. I decided, after much deliberation, to do the Bitcoin part of my taxes with Bitcoin Taxes.
To be clear on this, I am not a tax expert. I’ve been doing my own taxes through Intuit’s TurboTax for years. I take the basic refunds. I don’t do anything fancy with deductions. I simply put in the forms I’m given and either pay money when I’m told or get money back when I’m lucky. If you’re looking for advice from a tax professional, see the options I posted in Education 7 – Taxes. If you’re like me and want an easy way to report your taxes, follow along below.
As I said, I went with Bitcoin Taxes after much deliberation. I spoke with the creator of Bitcoin Tax at some length on Reddit over some issues I had with how the site presented itself, and those appear to be corrected. The site is not a site offering tools to tax professionals. It’s a site that helps people that don’t know tax code enter their data and spit out the proper tax forms they’ll need. This is exactly what I was looking for!
One of the things I knew I was going to have to cover was that I mined, or “dug” a bunch of clam early in the year and traded them for bitcoin. For those that don’t know, there is another cryptocurrency called Clam. They coded the initial dispersal of coin into existence based on Bitcoin, Litecoin, and Dogecoin addresses that held funds on a certain date. All you had to do was prove you had the private keys to those addresses and you would be given clam. This was how it was initially “mined”.
I used to keep small amounts of bitcoin in lots and lots of addresses. I considered this a security plan at the time. It didn’t necessarily pay off in that respect, but it paid off in clam digging. Anyway, I moved all my bitcoin to new wallets and used the private keys on my old addresses to get the clam. I then put the clam on an exchange, Poloniex, and then traded them for bitcoin.
I then used the import feature in Bitcoin Taxes for Poloniex export files. They have a seriously long list of exchanges from which they’ll accept imports. Something tells me you could contact the creator and he’d work with you on any that aren’t listed as well.
Oops. I’m not even through with the first step and I’ve already exceeded my limits. 100 trades for free sounds like a lot, but I sold all that clam for bitcoin in four days. If I went over 100 trades in four days or if you spend your bitcoin on a regular basis you should pretty much plan that you’re not doing this for free. I guess it’s time to upgrade.
The good news is that they have several options. You can select just 2015, get a jump start on 2016 by entering as you go, or pay a discounted sum to get forms to amend your taxes for 2010-2014. The prices are fair, in my opinion. And you can pay in bitcoin!
I then spent hours importing by hand the spreadsheet I’ve been keeping since DEC 2013 when I got started with Bitcoin. I’m sure I could have formatted my data in a way that could be imported but I’m pretty anal about my bookkeeping. I figured it was best to do it manually. Of course, after doing it manually I may format next year’s data in a manner that can be imported.
I started by importing all the coin I bought and sold during the 2015 tax year. Again, I had all of this data in a spreadsheet. I had the date of the transaction, the amount of bitcoin transacted, and the price per bitcoin at the time.
I then entered the CLAM I dug as income, which fell under mining.
I then entered the three things I purchased during 2015. I only entered the transaction information, not details, mind you. I gave them the date, the amount of bitcoin, and the price of Bitcoin at the time.
I then entered all the bitcoin I’d purchased between DEC 2013 and DEC 2015 into the Opening Position tab. As you may not know, the longer you hold bitcoin the better the tax breaks when spending or selling it. As I’ve been holding since 2013, the bitcoin I first sold would come from as far back as that. And as I was purchasing at much higher prices back then, I actually lost money when selling those.
After all this, I went to the calculate tab. It gave me a nice fancy graph of all the selling I’d done and whether I had gained or lost per month. I also got a nice, overall total. This let me know what to expect when I punch this into TurboTax.
I went to the Reports & Export tab. It gave me the option to download my data in different ways, whether that was spreadsheets, PDF documents, or files I could import into tax programs. Unfortunately, TurboTax Online doesn’t allow imports.
Note: there are options to doing manual input like I did. The download/CD version of TurboTax allows you to import. TaxACT Online allows import. According to the creator of Bitcoin Taxes, TurboTax Online 2014 allowed you to input the total of the 8949 statement and then send them paper copies of your taxes, but this wasn’t included in 2015 for some reason. He has a ticket open with them.
This means I spent the next several days going through TurboTax’s screens for selling stocks, inputting each line off the nice 8949 tax form that Bitcoin Taxes gave me, each line taking seven screens of inputs of one sort or another. This is just ridiculous, but I don’t blame Bitcoin Taxes. They made things easy up until TurboTax Online dropped the ball with importing data.
I then had to go back and claim my CLAM mining as income. But the information provided by Bitcoin Taxes made this easy as well. Seriously, as good as my bookkeeping was over the past few years, I don’t know if I could have done all this without their help. At least, not without ripping out my hair.
Once it was all over, I can say that I absolutely hate income taxes. Who doesn’t? But having tools that work make it easier to deal with. Bitcoin Taxes is absolutely awesome and I highly recommend it to anyone that needs to pay taxes in the US and uses Bitcoin. I will be purchasing access to 2016 fairly soon and use this service all year. I wish I could say the same about TurboTax Online. I may have to hunt for a new service next year if they don’t get their shit together…