Bitcoin and taxes is a topic that many investors like to ignore. Terms such as speculation period or private sales are foreign words, and how to deal with them is uncertain. But those who bypass the topic can face high penalties. Accointing.com has the perfect solution.
Bitcoin and taxes is an issue that many investors like to ignore. Terms such as speculation period or private sales are foreign words, and how to deal with them is uncertain. There can be hefty penalties if you do not declare winnings. We looked around and came across the tool from Accointing.com, which helps crypto enthusiasts with their tax returns.
Sales of Bitcoin and other cryptocurrencies can be tax-free. If you do it right. Because in Germany the following applies: Those who keep their crypto currencies for more than a year do not have to pay taxes on their profits. The speculation period for private sales transactions is reached after this period. Doesn’t sound that complicated at first.
The problem with this is the fact that most investors don’t buy and sell Bitcoin just once. The rule is rather that you keep buying and selling while you have many inputs and outputs in your transaction history. The list of inputs and outputs is getting longer and longer and very few people know how to assign and declare the trades to each other.
At the latest with the upcoming tax return, the difficulties then begin with the question of which sale belongs to which purchase.
The pitfalls of the Bitcoin tax
All the more tempting is the option of simply leaving out crypto profits in the tax return and hoping that the tax office won’t find out. But the legal situation is clear: Profits from trading in crypto currencies must be disclosed to the tax office.
Those who do not run the risk of tax evasion. And according to Paragraph 370 of the Tax Code up to 10 years imprisonment be punished. Even those who can prove that they committed the crime “frivolously” because they did not really know the law or the tax situation was unclear, risk fines of up to 50,000 euros. In short: it’s not worth it.
What is worthwhile, however, is to check the time intervals between purchases and sales. Because private trading in cryptocurrencies is classified as a private sales transaction within the meaning of Section 23 Paragraph 1 No. 2 of the Income Tax Act.
This means that anyone who makes profits with cryptocurrencies must pay income tax. There are two exceptions to the tax liability: Profits are only taxable if they are made within one year and exceed the exemption of 600 euros. After that, the speculation period has expired and you don’t have to pay taxes.
A basic distinction is made between two ways of declaring transactions in the tax return. These are called FIFO (First in, First Out) and LIFO (Last in, First Out). At FIFO one always assumes that those coins that are bought first will also be sold first.
LIFO works in the opposite way: Here one assumes that the coins that were last purchased are the first to be sold. Depending on which method you use, you can save money on the Bitcoin tax return. In this way, FIFO can help meet the speculation period of one year. LIFO, on the other hand, can be useful if the winnings do not exceed the maximum amount of 600 euros.
But how does the tax office know which of my coins I bought and when? And which method do I now use to get the most out of my tax return? In theory, all Bitcoin investors would have to keep a meticulous record of every transaction. Then you would have to state exactly which transactions belong together and for which sale you made how much profit.
We looked around for solutions and turned to the software from Accointing.com encountered. You connect this to your own wallet, import all transactions and let the software calculate how best to declare the respective profits or transactions.
Accointing.com: Bitcoin tax tool in a quick check
Importing your trades into the Accointing.com software is comparatively straightforward. The software can be connected to hardware wallets such as ledgers or numerous crypto exchanges. Anyone who has imported the history of purchases and sales still has to declare them and state whether they are purchases or sales, gifts or swaps.
The “Trader Tax Optimizer” (TTO) now automatically calculates which type of tax calculation best suits the portfolio. You can then have an automated tax report created for you. This not only offers an overview of all your transactions. The report also contains a file that you can later import into your tax program when you do your tax return.
Accointing.com: The Bitcoin Tax Tool
The tool also helps you to make decisions as to whether you want to realize profits or losses in the respective year. Because it calculates which portion of your coins has already exceeded the holding period and how high the profit from it is. Then you know exactly how many coins you can still sell without having to pay taxes. Even with coins with which you have not yet exceeded the holding period, the tool shows you how high your potential profits are. Here, too, you can still decide whether you want to sell your coins or whether you prefer to hold them for a while.
If you are curious, you can first find the Accointing.com solution in the Free Version testing. This already contains all features, but is limited to 25 transactions. That will not be enough for most crypto fans – the Hobbyist package, which comprises a total of 500 transactions, is recommended.
Other options for Bitcoin tax are the Trader Package (5,000 transactions) and the Pro Package (50,000 transactions). Each of the licenses is valid for 365 days. During this time you can create as many tax reports as you want – even for previous tax years.
Bitcoin tax: complete solution with support system
If you ever have problems, you can contact the service’s support system. Because Accointing.com works with the law firm Winheller, which specializes in tax law issues in the crypto area. Accounting.com ensures that all taxes on Bitcoin and other crypto currencies are calculated in accordance with German tax law. In this way, the company ensures that everything complies with the current legal guidelines.
In the unlikely event that something is unclear, the Winheller partner program provides additional advice and support for the subsequent tax return and communication with the tax office. If the tax office doubts the submitted tax return, you can have an accompanying letter created directly in order to avoid any accusation of tax evasion.
Furthermore, there is also the possibility of having a letter of objection formulated if the tax office should demand more than is justified. In any case, you get the most out of your tax return – and you can save money on Bitcoin tax!
Accointing.com is a tax company specializing in cryptocurrencies, headquartered in Switzerland. Founded by five fellow students who started trading cryptocurrencies in 2015. After they had noticed again and again how time-consuming and costly it is to prepare tax returns as a trader, they decided in 2019 to design their own software. In just two years, Accointing.com grew to a company with 40 employees in over 15 countries. Its partners include Winheller and BDO, and their portfolio tracker has now been downloaded over 400,000 times. To date, Accointing.com has over 150,000 enthusiastic users.
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Bitcoin Tax: This tool saves time, money and nerves