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There are decentralized networks protected by blockchain technology that carries virtual currency protected by cryptography, this virtual currency is called Cryptocurrencies.
One of cryptocurrency’s main advantages is that it is not distributed or regulated by any central authority, this feature enables the cryptocurrency to remain outside government control, potentially, without intervention. Over the years taxes were also implied on cryptocurrencies and furthermore development of crypto tax software has helped millions of people in their tax calculations.
What Are The Different Types Of Cryptocurrencies?
There are various types of cryptocurrencies, such as
- Bitcoin (BTC)
- Ethereum classic
- Stellar lumen
- Bitcoin cash
- Binance bitcoin
- Bitcoin SV
People who own cryptocurrency know that it is a game-changer in the field of financial transactions due to the various feature they have to offer
Anonymity Of Users
Since there is no central authority, during cryptocurrency transactions the users do not need to identify themselves. Cryptocurrency uses both a private and a public key system to authenticate transactions and the decentralized system will then validate and record the transactions on the Blockchain when a transaction request is submitted.
All cryptocurrency transactions are permanent, so the transaction can only occur if it is initiated by the respective key owner and can not be reversed once initiated. Although changing the transactions isn’t all that unlikely, the safe nature of blockchain makes it incredibly difficult to do so.
Many cryptocurrencies are decentralized systems that are distributed across a wide network of computers and are spread all over the world, implying that they are not held by any government and may live and sustain outside the regulated framework. Each transaction is authenticated by cryptography, and registered in a publicly accessible Blockchain ledger.
Typically, cryptocurrencies are small in number and this is coded in the algorithm when constructing the digital currency type. This is done intentionally to avoid abuse of its digital currency and to stop the decline in value over time.
Related: Read the best crypto news here.
What Are The Advantages Of Owning Cryptocurrencies?
Listed below are some of the advantages of owning cryptocurrencies
Free Of Barriers
Through eliminating barriers and trade controls, foreign trade has been made smoother and more available, making the transaction possible in various currencies at the end.
Payments Are Instant
Unlike other transaction methods that take hours or days to reflect on your account, the blockchain technology that is used in cryptocurrencies allows the transaction to happen immediately.
Reduced Number of Frauds
A purchase can usually be reversed in credit cards using chargeback, this is a function that fraudsters abuse quite often. This is not the case in a cryptocurrency transaction and is due to the permanent existence of the cryptocurrency.
Confidential In Nature
In this decentralized system, there is no need for a person to identify themselves or send anything other than what is necessary. It helps preserve secrecy during the whole transaction as all cryptocurrency transactions are secured by the blockchain technology.
Taxes On Cryptocurrency
According to the Internal Revenue Service (IRS), cryptocurrencies should be treated as assets and properties for tax purposes. Meaning, if you own any kind of cryptocurrency then you should treat it like owning other forms of property, like gold or real estate and you are also required to report gains and losses, you also have to pay taxes. Failure to comply may result in heavy penalties, as it is treated as a fraudulent act. If anyone fails to comply with this law then they will incur heavy penalties.
The IRS also sent over 10,000 letters to suspected cryptocurrency holders to notify them about the same.
Softwares For Cryptocurrencies
There are many software that are available to make crypto calculations easier, this software is also referred to as crypto tax software. The benefits of using this software are many. It reduces the possibility of man-made error in calculations with its accuracy and also they help people in being compliant with the law.
Cryptocurrency tax calculator serves as the data collector for third parties, where you can connect your cryptocurrency wallet to the program. The crypto-currency tax program then produces comprehensive transaction profit and loss reports while ensuring they are compliant with IRS guidelines.
Best Crypto Tax Softwares
Since cryptocurrency gained a lot of popularity over the last decade and is used by millions of people, therefore opening a wide market for organizations to create crypto tax software to aid these millions of users.
Listed below are some of the most popular crypto tax software in the industry
TokenTax is the only tax crypto tax software to support any major trade. They have direct connections to all of the sites to import your trading data automatically. You can simply upload a file with your trading data for the exchanges without imports and their platform will automatically ingest your information.
TaxBit is the only crypto tax software created by CPAs, tax lawyers, and app developers. TaxBit has a full audit trail for all their tax figures so that any CPA or IRS investigator (in the case of an audit) can easily check the accuracy of your crypto tax. TaxBit blends into every big exchange.
The crypto tax software uses integrations with over 25 major exchanges to measure your profits to import your transaction data, and provides you with export documents to file with your taxes.
The user interface is quick and tidy. Their ‘ smart matching ‘ algorithm matches your withdrawals and deposits it in their licensed exchanges and the code is easily reviewable. This matching feature in this crypto tax software helps you in avoiding any kind of negative balance which could have a negative effect on your tax report’s accuracy