Bitcoin and taxes is a topic that many investors like to ignore. Terms like speculation period or private sales are foreign words and it is uncertain how to deal with them. But those who sidestep the issue can face hefty penalties. Accointing.com has the perfect solution.
Bitcoin and taxes is a topic that many investors like to ignore. Terms like speculation period or private sales are foreign words and it is uncertain how to deal with them. There can be heavy penalties if you don’t report your earnings. We looked around and found the Accointing.com tool, which helps crypto enthusiasts with their tax returns.
Sales of Bitcoin and other cryptocurrencies may be tax-free. If you do it right. Because in Germany the following applies: Those who keep their cryptocurrencies for more than a year do not have to pay taxes on their earnings. The speculation period for private sales transactions is reached after this period. It doesn’t sound that complicated at first.
The problem with this is the fact that most investors do not buy and sell Bitcoin only once. Rather, the rule of thumb is that you keep buying and selling as long as you have lots of 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 operations to each other.
At the latest with the next tax return, the difficulties begin with the question of which sale belongs to which purchase.
The pitfalls of the Bitcoin tax
Even more tempting is the option to simply omit the crypto earnings on the tax return and hope the tax office doesn’t find out. But the legal situation is clear: the gains from cryptocurrency trading must be reported 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 in prison be punished. Even those who can prove that they committed the crime in a “frivolous” way because they did not really know the law or the tax situation was not clear, run the risk of receiving fines of up to 50,000 euros. In short: not worth it.
However, what is worth checking is the time intervals between purchases and sales. Because private cryptocurrency trading is classified as a private sale transaction within the meaning of Section 23 Paragraph 1 No. 2 of the Income Tax Law.
This means that anyone who makes a profit from 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 600 euro exemption. After that, the speculation period has expired and you don’t have to pay taxes.
A basic distinction is made between two ways of reporting transactions on the tax return, called FIFO (first in, first out) and LIFO (last in, first out). In FIFO it is always assumed that the coins that are bought first will also be sold first.
LIFO works in the opposite way: here the coins that were last bought are assumed to be the first to be sold. Depending on the method you use, you can save money on your Bitcoin tax return. In this way, FIFO can help meet the one-year speculation period. LIFO, on the other hand, can be useful if the earnings 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 what method do I use now 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 indicate exactly which transactions belong together and for which sale you made how much profit.
We looked for solutions and found the Accointing.com software. You connect this to your own wallet, import all transactions, and let the software calculate the best way to report the respective earnings or transactions.
Accointing.com: Bitcoin Tax Tool in a Quick Review
Importing your operations into Accointing.com software is relatively straightforward. The software can connect to hardware wallets such as ledgers or numerous crypto exchanges. Anyone who imported the purchase and sales history has yet to report them and indicate whether they are purchases or sales, gifts or trade-ins.
The “Tax Optimizer for Merchants” (TTO) now automatically calculates which type of tax calculation best suits the portfolio. You can then create an automatic tax report for yourself. This doesn’t just provide an overview of all your transactions. The report also contains a file that you can then import into your tax program when you file your taxes.
Accointing.com: The Bitcoin Tax Tool
The tool also helps you make decisions about whether you want to profit or lose in the respective year. Because it calculates how much of your coins has already passed the retention period and how high the profit is. Then you will know exactly how many coins you can sell without having to pay taxes. Even with coins that you have not yet passed the retention period with, the tool shows you how high your potential earnings are. Here you can also decide if you want to sell your coins or if you prefer to hold them for a while.
If you’re curious, you can try the free version of the Accointing.com solution first. This already contains all the functions, but is limited to 25 transactions. That won’t be enough for most crypto fans – the Hobbyist package is recommended, comprising a total of 500 transactions.
Other options for the 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 Winheller Law Firm, which specializes in tax law issues in the area of cryptocurrencies. 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 current legal guidelines.
In the unlikely event that something is not clear, Winheller’s partner program provides additional advice and support for subsequent tax filing and communication with the tax office. If the tax office doubts the filed tax return, you can have an accompanying letter created directly to avoid any allegation of tax evasion.
In addition, there is also the possibility that a letter of objection will be formulated if the tax office demands more than is warranted. In any case, you get the most out of your tax return, and you can save money on taxes on Bitcoin!
Accointing.com is a Swiss-based cryptocurrency tax company. Founded by five fellow students who started trading cryptocurrencies in 2015. Having noticed time and again how slow and expensive it is to prepare tax returns as a merchant, they decided in 2019 to design their own software. In just two years, Accointing.com grew to a company with 40 employees in more than 15 countries. Its partners include Winheller and BDO, and its portfolio tracker has been downloaded more than 400,000 times. To date, Accointing.com has more than 150,000 enthusiastic users.
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