When Do I Need a Crypto Reconciliation Specialist?
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The biggest challenges in reporting crypto taxes are often missing transaction data and/or interpreting data from DeFi or NFT transactions. For example, missing trade data can cause missing cost basis errors, which drive up your capital gains. Or, when DeFi or NFT transactions are not supported by a crypto tax calculator, they may not be recognized as taxable events, which can lead to you underreporting crypto gains.
In these cases, one of the best things you can do is work with a crypto reconciliation specialist. These are data analysts who know how to comb through exchange, wallet, and block explorer data in order to identify, track, and properly record your tax lots. As part of our VIP plan, a crypto tax specialist will reconcile and report your taxes for yo
Some of the most common situations in which a crypto reconciliation specialist can help include:
Lost or inaccessible exchange trading history
Missing cost basis (the price of which you acquired crypto you later sold/traded away)
Worthless and/or illiquid ICO tokens
Margin trading tax calculation trouble
High transaction count reconciliation
Unsupported DeFi transaction data
Interpreting transaction reports from exchanges
Incorrect or conflicting results from other tax platforms
These are the edge cases in which TokenTax shines. We are confident that we can help you figure out all of those tricky situations and give you peace of mind. Let’s discuss some of the scenarios mentioned above.
Lost or inaccessible exchange trading history
If you used an exchange or platform that was hacked or shut down and you lost access to your coins, there will be a gap in your crypto transaction audit trail that you will need to reconcile for tax purposes.
TokenTax’s crypto reconciliation specialists help our VIP clients in this situation by creating “synthetic” trades that fill in missing cost basis and give you a complete trade history with no missing cost basis errors. This is a complicated process, but it is done conservatively so that it can withstand a crypto tax audit.
Worthless/ illiquid NFTs or ICO tokens
Unfortunately, not every crypto project works out. If you bought a lot of NFTs or ICO tokens, and now there is no market for them, it can be very difficult to sell them. If you can’t sell them or otherwise dispose of them, you can’t realize the crypto losses and use it to offset your capital gains or income.
If you find yourself in this situation, we recommend working with a crypto tax reconciliation specialist, like the ones at TokenTax.
Margin trading data from platforms like Poloniex, Bitmex, or Kraken are difficult to translate into transactions that the IRS can understand. You need to gather and triangulate trade data to ensure that unrealized positions aren’t included in tax liability calculation. Many crypto tax softwares can’t handle these trades.
However, our margin team is able to get missing data from exchanges and solve margin trading cases that no other crypto tax calculator could figure out (and we’re proud of it).
High trading volume
More advanced traders find they have an overwhelming number of crypto transactions to make sense of. They may have used crypto trading bots to execute thousands of trades, or they may have engaged in margin trading on several platforms. In cases like these, when the mountains of data seem insurmountable, crypto tax software and reconciliation specialists are your friends.
Using our crypto tax calculator, a recon analyst will split your trades into chunks, processing them separately to ensure your cost bases are accurate.
Unsupported DeFi transactions and NFT mints
DeFi will always move faster than engineers can work. This means there could be instances when your DeFi trades or NFT mints aren’t being interpreted correctly by crypto tax software, which could lead to incorrect tax reporting. In TokenTax, finding and correcting unsupported transaction data is easy, but for users who don’t have the time or desire to take on the process, a crypto reconciliation specialist can take on the task.
Different results from different crypto tax calculators
It can be nerve-wracking when different crypto tax software produces different results for the same imported data. Which reports will withstand a crypto tax audit?
At TokenTax, our crypto reconciliation team can take Forms 8949 generated by other crypto tax calculators and dig into them, reverse-engineering transactions to find out why providers are interpreting them differently.
What is crypto reconciliation?
Crypto reconciliation is the process of meticulously reviewing, analyzing, and aligning cryptocurrency transaction data to ensure accuracy, completeness, and compliance with tax reporting requirements. This complex task involves sorting through various sources, such as exchange records, wallet data, and blockchain explorers, to identify, track, and properly record each transaction's details. Crypto tax software and experienced crypto tax professionals like ours at TokenTax can help with this process.
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