Reasons to choose CoinTracking over TokenTax as a tax accounting solution if you venture into trading on decentralized platforms.
Let’s face it. It’s not easy dealing with taxes if you trade cryptocurrencies. Certainly, cryptocurrency exchanges are required by law to help us out. However, if you dabble in decentralized finance, may the force be with you.
If you desire an accurate Form 8949, but happened to do more than ten or so transactions for the year, you’ll need professional help. Professional help needn’t come in human form. You can sign up for service from TokenTax or CoinTracking.
Here’s my experience with both platforms.
TL;DR
Caveat emptor… I recommend that you steer clear of TokenTax. CoinTracking is much more pleasant to work with and it costs way less.
At last, I am able to declare my taxes to the government of the United States of America. TokenTax deserves all the praise for that. However, they also deserve all the blame for my filing being 6 months late.
I trade more than I should. That’s not a problem though. I’m lazy. That’s my problem. I don’t do any accounting unless there’s a gun to my head.
Every April 15th, the US government points one of its many weapons at my hairy, matted head. To be more precise, my cryptocurrency activities return to focus in the bullseye of the Internal Revenue Service.
I’m not alone. All US citizens and permanent residents must fully disclose every cryptocurrency transaction at that dark time. Knowing this, savvy entrepreneurs have come to our aid with services like TokenTax and CoinTracking.
Exorcise TokenTax From Your Consideration Set
A buddy of mine suggested that I select TokenTax back in 2020. It wasn’t a seamless experience, but TokenTax did the trick. Customer support helped and eventually, although he was dragged kicking and screaming, my CPA felt comfortable enough to submit my tax returns.
Hoping for an improved experience, I signed up for the TokenTax VIP service in 2021. Having done thousands of transactions in 2021, it seemed like the right approach at the time.
The yearly VIP package at TokenTax is $3,499.
That’s insane pricing, right? At the time I purchased my VIP package it was only $2,500 per tax year. Either way, the cost isn’t worth the benefit.
At the time, I thought I was dealing with the best solution on the market because: my friend! They surely wouldn’t lead me astray.
Turns out he was wrong and I want to encourage all of you to exorcise TokenTax from your mind and further consideration. TokenTax is inferior to CoinTracking.
TokenTax is opaque. Worse yet, they make no excuses for their lack of transparency and refuse to acknowledge how difficult it is to interact with them. [1]
Certainly, not all of their customers will have this opinion. I am a huge proponent of decentralized finance. I’m probably more sour than 99% of the market because I love trading with margin on platforms like DDEX.
Sadly, DDEX died. I’ve been forced to work with dYdX and the primadonnas there ever since. That’s okay though. TokenTax claimed to support dYdX.
Turns out that the support was mostly marketing hype. Pure exaggeration. There is no programmatic support for the dYdX (now legacy) layer one margin trading service.
What they actually do is ask you to manually export CSV files from dYdX. They want transfers and transactions. No doubt, they then send those files to smart folks in some low cost jurisdiction to calculate my tax liability.
Jeez. Anyway…
No problem, right? Why not go through the hassle if they will produce that all important IRS Form 8949.
IRS Form 8949
For those of you not yet initiated in the annual practice of submitting your trading information to the IRS, Form 8949 is tedium incarnate. The purchase or sale of any cryptocurrency is considered the acquisition or disposition of a capital asset.
Consequently, every leveraged trade on dYdX must be a line item on that form. Traditional financial services providers make filling out the 8949 a triviality. They are required by law to send a 1099-B (or 1099-S) with all the transactions necessary for completing the Form 8949.
Shout out to my CPA for educating me.
Anyway, TokenTax purports to support dYdX. After submitting all of the CSV files they requested, the best they could do was report one line of dYdX profit. That was the end of story.
I wrote to their customer support staff for an explanation. The response was, “we create a sum for the gains made for trades on margin. I honesty don’t have the inner working of dYdX margins calculations; I know we’re are pretty much the only one’s who can do it though :)”
My Form 8949 was permanently sabotaged with a smiley.
Compensation For Grievances
Not being inclined to stay silent after being abused, I wrote to the founder. To say I wasn’t impressed would be an understatement. Nonetheless, I communicated this as politely as I could via the integrated Zendesk interface.
The founder immediately popped online to read my message, but left it to an underling to respond the next day.
No doubt, I’m just one gullible customer that needn’t receive compensation. However, I am quite certain that my experience is not abnormal. So this review is also plea for other dissatisfied customers to register their experiences.
If we don’t police our industry we’ll be left with a market of lemons.
CoinTracking
The experience with CoinTracking was completely different. CoinTracking’s dashboard is replete with graphs and other powerful devices to enhance the user experience. They deserve credit for providing a much better user interface than TokenTax.
Data intake is not only noticeably faster, but also CoinTracking provides second factor authentication services. These are huge improvements on TokenTax.
The only thing missing at CoinTracking was a Zendesk like interface so that we can interact with customer support staff synchronously online.
Giving Credit Where Due
TokenTax does what you need it to do. Let’s give them that much. However, do we really want to pay $3,499 for lousy service?
The yearly UNLIMITED package at CoinTracking is $659.88.
We do not. Especially, since you can receive higher quality and faster support at a lower cost via CoinTracking.
Speed is everything in this dance with the government. The IRS levies 12% per annum fines on late payments. In other words, the IRS will bill you more than the cost of the CoinTracking Unlimited Package if a year lapses and you owed more than $5,500 in capital gains tax.
Conclusion
Get CoinTracking and pay your taxes as swiftly as you can. I depended on TokenTax. They let me down. Regretfully, I have to pay thousands of dollars in late fees and fines to the US government. Don’t let that happen to you.
“A government big enough to give you everything you want, is a government big enough to take away everything that you have.” — President Gerald Ford [2]
The biggest factor that should weigh in your decision making is community endorsement. When you visit the TokenTax website, you won’t see any. However, the CoinTracking website is replete with partnerships.
Partnerships prove that the industry knows your product. The industry is willing to work with CoinTracking and associate their brands with them. We should take our cues from that.
Don’t take your cues from the list of integrations. That list may be a fabrication. At least, that’s the case with TokenTax.
Finally, Gaurav Agrawal at Coinmonks reached the same conclusion about the superiority of CoinTracking using a different methodology.
Take a look. Thanks to his article my tax reporting burden has eased dramatically. He helped me. Hopefully, my article helps you.
This review contains more personal grievances than I’d have liked to express. An objective comparison of two competitors is always preferable to anecdotal evidence. Please do further research. My suffering is real, but the experience provides only one datapoint. Increase your sample size.
[1] I actually liked two out of the three support staff I interacted with over the years. Unfortunately, they couldn’t solve my issues within reasonable timeframes. More importantly, they could never address my biggest grievance: DEX integration.
[2] I’m not saying that big government is bad. Always DYOR. I’m quoting President Ford because 2021 tax liabilities made that statement hit home.
