First let me start by saying that I am a law-abiding citizen. I am the father of four kids, an honest church going individual and I would never intentionally commit any crime. I am sure there are countless laws I have broken over the course of my life like rolling stop signs or speeding, but I do respect the law and strive to be an upstanding productive citizen of society and a good neighbor living by the golden rule.

Having said that, I had some free time on my hands around the Holidays last year and decided I’d explore the crypto world and blockchain since I am a developer and have heard much about it. When I did, I instantly became fascinated and understand that this is no different than the .com boom and when this thing does pop, out of the ashes will be the next ebays, amazon’s, etc. The technology and the concept of crypto currency is revolutionary and I’d almost say as important as the internet was 25 years ago.

With my extra time, I decided to make a few trades and do what all noobs do. I put some money coinbase and also made a couple of transactions with my credit card to get some coin (paid a steep 10% fee to do this, I do not recommend this). I then transferred some funds to some of the other exchanges and started making some trades. Before I knew it, I was several dozen trades in and had made some money, not a ton, but enough to consider the hours I had spent delving into the crypto world very worthwhile.

I saw a post somewhere in the headlines about the new rules going into effect here in the USA about a loophole in the tax law changing so that crypto currency would be considered property and not a like kind exchange. I thought about that for a minute and then grew very concerned.

What this means is that crypto currency would be taxed like any other stock or mutual fund I had purchased and traded in the past. This means that it gets reported as a capital gain or loss and the most concerning part, you had to be able to calculate how much you purchased, what you paid for it and then when you sold it, you had to track what you sold it for and how much of it you sold.

Now, two things that really scared me.

1. Of the trades I have done, only my first couple were in US Dollars, none of the others were
2. I’m trading in fractions of currency and not in whole lots (e.g. I buy 1 coin and I may sell 0.7 of that coin at one time and 0.3 at another)

With these exchanges like the wild west and none of them offering standard reporting I knew I was in big trouble, even with the few trades I had made. Trying to calculate and keep track of all of this within a spreadsheet simply was not an option. I know it may sound simple, but trust me, it gets hairy real quick.

I went back and looked at the trail of trades and I was close to 100 trades across a dozen different exchanges and I didn’t know the order as I was doing most of it at varied times and very quickly and not keeping track of any of it.

So now I was left with the concern, what have I done? I have some profit that will need to be accounted for. I could of course do nothing and leave it all in my wallets, but at some point I’d probably want to be able to pull some out to my fiat currency for use. I had read also that coinbase had to submit records for some of their users and I’m sure that the IRS will be sending out a few letters to those folks who probably did nothing. I know I would not want to be in that situation and go through the hassle of an audit. I also know that I did not want to not do anything and basically be a criminal committing tax fraud for not reporting properly.

I’m sure more regulation will be coming and many more exchanges will be required to report the users trades and transactions. Now that my name is out there on these exchanges with a paper trail of trades and taxable events, it now became apparent that I needed to start tracking and keep things in order.

I researched the options and it is just as I thought, slim pickings. There were several trackers out there but for me, I wanted the one that was going to be the easiest. I didn’t feel like trying to do this on my android device made sense, I wanted something more robust and something that could read in my trades and supported the most exchanges possible.

From my research, I kept coming back to the one clear winner, CoinTracking.info. They supported a ton of exchanges, had a free to try option to toy with it and the interface was clean with a ton of reporting features. The only hang-up, to get the API import I so wanted, it was expensive. I looked at the lifetime option and it’d be hundreds of dollars. So I ended up opting for the one year pro option. This will work sufficiently for me for the time being.

I have since then spent hours entering transactions and trying to get everything setup right. It is not perfect and I did have some issues and strange things I noted, but it definitely has some fantastic reporting and can calculate and keep track of the trades and convert things accordingly to USD to make the reporting come tax time very easy. I like this and plan to keep this system up to date.

I’m curious what others are doing? This is not a trivial exercise and I don’t see a whole ton of chatter about it which has me curious. I am sure around tax season folks will start thinking the same thing I did, “uh-oh, this is not going to be easy.”