When it comes to your hard-earned profits you want to make sure that you use the right calculations so that you pay the right amount of tax. The first step in this process is to get the data of ALL your crypto asset transactions. When you first start preparing your data for tax, often this is the most painful part of the process because you have to remember and trace where ALL your crypto assets are.
At Bullivant Accounting and Tax Services, we suggest that you just start and systematically work your way through the data. You know the saying of “it’s where you left it last” applies– go to the last place you remember and get a transaction report from your first trade. Typically, you get a transaction report per wallet.
Keeping track of the purchase price and exchange on the day your crypto asset was purchased is important to determine the best tax treatment. The FIFO (First-In-First-Out) principal is what is generally used when there is no clearly identified base cost – in a nutshell, if you cannot show when and for how much a transaction was acquired for, then you have to use FIFO to calculate it.
At this point there are two ways to work with the data – the easier way is to use a tax calculator to do all the heavy lifting/number crunching and the second way is to do it manually.
If you choose to manually calculate the data, you need to put all the transaction data together in one report:
Download the transaction data into CSV data files, or you can set up an API Keys to fetch the data (These Keys make it a lot easier to import the data)
Every transaction needs to be classified as a buy, sell, airdrop etc
Even those airdrops / rewards / promotional gifts have a value
In essence the following data is required (When you traded, what currency you traded in, the transaction price amount, how many fractions / units you traded and the fees and its transaction classification:
Or you can choose to use a Crypto Tax Calculator. This is a software programme that you subscribe to and once you have connected all the wallets the calculations are done for you. Just be aware of the following before you press BUY:
For South Africa, the Tax Year is from March to February (a lot of the international tax years are calculated from January to December). Make sure you can change the reporting year.
Data formatting is not consistent across the Crypto Platforms – you may have to do some manual input for the less-known platforms. The tricky part in using a tax calculator is that you need to be able to map the transactions into their calculator (some of the calculators have been pre-configured so it is easy to upload the data without having to have any changes).
The classification used to classify a trade may be different to what your platform uses (and if not careful could have very different outcomes).
The way that calculators generally charge is based on the number of trades you do. It is important to know if they can support your data correctly.
With Bullivant Accounting and Tax Services, you will be able to collect your crypto transaction data, and crunch the data so that you can calculate for the correct tax outcome – whether you are a hobby trader or a professional crypto trader.