Sometimes it can be a mess to calculate tax liabilities of the profits of trading bitcoin and other cryptocurrencies, especially when you trade with several coins on several exchanges. The German startup CoinTracking helps to organize the data for your tax declaration. We took a look at the platform and talked with its founder.
In 2017, most traders, tax consultants, and tax authorities know the problem. Somebody trades with cryptocurrencies on several exchanges and with several currencies. They’d like to report their gains for tax purposes, but they don’t know how. There are some basic concepts, how to tax cryptocurrency trading, but in real life, things get very complicated very fast. You find yourself in front of a mountain of data, not knowing what to do with it.
A helpful tool, in this case, is CoinTracking. On this platform, you can build your crypto trading portfolio by importing data from 23 existing and seven former exchanges. Also, you can import an API read-only key to record the trading in real time, and you can connect the portfolio with bitcoin addresses, for example, to include your cold wallet in your portfolio analyses.
After importing all this data, CoinTracking generates a lot of statistics about your trading activity, about your profits and losses, your balances and so on. On top of this, CoinTracking can create an individualized tax report, which can be the base of your tax declaration and your interaction with tax authorities.
CoinTracking generates income with some model of “free to play, pay to win”: There is a free version, which provides the basic features, but restricts the number of APIs you can connect with and has no tax report feature. For currently 0.07 Bitcoin you can buy one year of access to the Unlimited version of CoinTracking with all features.
In our interview, the founder of CoinTracking, Dario Kachel from Munich, provides some background about the platform.
- 1 How Did You get Started with CoinTracking?
- 2 Did you Develop it Alone?
- 3 How Popular is your Platform? How Many Clients Do You Have?
- 4 What Exactly Does CoinTracking Do? What are the Benefits for Traders?
- 5 So I Can Use CoinTracking for my Tax Declaration?
- 6 Do You Cooperate with Tax Consultants or Tax Authorities?
- 7 Your Users Trust you with Very Sensitive Data. How Do You Ensure They do not Have to Regret this?
- 8 My Account shows Losses for 2017. This was a surprise. Can I Declare this in my Tax Report? Or is this a Question that goes Beyond Your Knowledge?
How Did You get Started with CoinTracking?
I started to do my first coin trades in early 2013, amongst other at Mt. Gox. Doing so I realized soon that it becomes nearly impossible to get an overview of your coins and profits with a large number of trades.
Like most other people I started to create an Excel table to track my profits. At this time I meet many other traders, which had the same problem. So I realized that there is a massive demand for a portfolio tool for digital currencies.
Since it was annoying to maintain the Excel table manually, I realized that there is a need for a better solution. So I started to develop CoinTracking. In April 2013 the software launched, at this time with the name my-btc.info.
Did you Develop it Alone?
No. Right now we are a team of seven people. Besides me, there are people responsible for support, marketing, exchange APIs and the mobile apps we will release soon. All of us are active bitcoin users and moderators in some crypto communities.
How Popular is your Platform? How Many Clients Do You Have?
The demand for portfolio tools for digital currencies is huge. Currently, we have 12,000 new users every month and as a whole 56,200 users.
What Exactly Does CoinTracking Do? What are the Benefits for Traders?
There are a lot of advantages for traders; you get an overview on all coins you own and their worth, without a login on an exchange. You can calculate realized profits as well as non-realized profits and the fees which come along with realizing this profit. Also, you can calculate tax-free coins, the value of a coin at time of a transaction and much more. With a lot of options for the tax report and methods like FIFO, LIFO, HIFO or LOFO you should be able to use CoinTracking for your tax declaration wherever you live.
So I Can Use CoinTracking for my Tax Declaration?
Sure. Our tax reports calculate any information needed for your tax declaration. Capital gains, the sale of fixed assets, profits by trades with respect to holding times. Also, we include reports for any kind of income, be it mined or gifted coins, or any kind of losses, be it stolen or lost or hacked coins.
By making the tax report individually configurable, it can not only be used for Germany but the whole world. Besides thousands of users, we also use this tool for ourselves to make our private and business tax declarations.
Do You Cooperate with Tax Consultants or Tax Authorities?
Yes, we cooperate with tax consultants who are specialized in digital currencies. In Munich, we closely cooperate with a tax and law office. Now and then we also collaborate with tax consultants from other countries.
Your Users Trust you with Very Sensitive Data. How Do You Ensure They do not Have to Regret this?
It is important to know that CoinTracking is not an exchange, but a pure tool for your portfolio analysis. We do not host coins of the users, but only information about trades. We also don’t save API keys we consider insecure, which means from exchanges that don’t allow API keys with restricted permissions. We don’t accept keys which give us the permission to do something with the user’s funds.
The registration on CoinTracking is completely anonymous. The submission of data like email, name or address is optional. All user data is stored encrypted and in another place as the trade information. Also, you can secure your account with two-factor authentication. With the import of wallets, users can only import transactions with a specific coin or wallet addresses. These data are anyway publicly visible on the blockchain for the whole world.
My Account shows Losses for 2017. This was a surprise. Can I Declare this in my Tax Report? Or is this a Question that goes Beyond Your Knowledge?
To calculate your profits correctly for the tax declaration you must list all transactions in CoinTracking. Only this way the profit can be calculated correctly.
I want to advise every user to take some time to import all the data diligently. If you trade on four exchanges, but you only list trades of three exchanges, this will cause problems. Also, gifts and mined coins must be listed.
Surely it can happen that at the end of the year you end with a loss; this should be reported to the tax authority. You don’t get money back, but you can settle the loss with other profits.
If you are not sure with all this, you should contact a tax consultant. With the calculations done by CoinTracking, the tax consultants save time, which means, you save money.