- CryptoTaxCalculator and xDai chain partner to make tax recording easier.
- The partnership will let users create easy-to-read reports when preparing tax returns.
- Recently, the IRS has been increasing its efforts to catch crypto-owning tax-evaders
Tax assistant platform CryptoTaxCalculator and xDai chain announce their partnership making life easier for xDai users come tax time. CryptoTaxCalculator imports and analyzes chain data to produce easy-to-use reports about transaction histories that can be used for filing taxes. As xDai supports a wide variety of transaction-heavy DeFi products built on its chain, the challenges facing many of its users when sorting out taxable events will be alleviated through its integration with a leading name in crypto tax software.
A Lot of DeFi Running on xDai
xDai is a popular Ethereum based sidechain that offers many advantages to using Ethereum’s main network. Since its launch in 2018, xDai has helped the DeFi community increase its efficiency when using Dai, the popular stable coin minted by MakerDAO. xDai allows users to use their Dai in a single coin environment where ETH is not levied for transactions as they are on Ethereum’s main chain.
xDai holds the distinction of being the first derivative of Dai’s stablecoin. By moving DeFi activities to the xDai chain, xDai has been helping to reduce congestion on the Ethereum network and provide users with lightning-fast and low-cost transactions since its inception. Its many use cases have led to many protocols being built that depend on xDai to deliver DeFi services.
A Ton of Taxable Events for xDai Users
In order to benefit from the speed and low costs of using xDai’s chain, users must enter their Dai into a bridged contract that creates an equal amount of xDai, which can then be used to participate in DeFi on xDai. Since one asset is disposed of for another, this is considered a taxable event. This may take some DeFi users by surprise when the time comes for them to do their taxes, as, from the user’s point of view, no value was gained or lost in the transaction.
In fact, many events occur within the DeFi ecosystem, many actions users make daily without thinking twice, that can be considered taxable events. Navigating which events are taxable and which events are not becoming incredibly complicated. Considering the novelty of DeFi compared to traditional finance, imagine trying to explain yield farming to an accountant who is still trying to wrap his head around cryptocurrency at a fundamental level.
Additionally, when using DeFi platforms and protocols, a universe of smart contracts are executing multiple transactions for what seems like a pretty straightforward event for users, and this means the DeFi community is entering into exponentially more transactions than most are aware of when clicking buttons on their MetaMask.
CryptoTaxCalculator Eases the Tax Time Burden
With the recent partnership between CryptoTaxCalculator and xDai, the DeFi community on xDai can create easy-to-read reports for their accountants or themselves to use when preparing tax returns. CryptoTaxCalculator does the work that would normally take hours of sorting through data to complete. The integration of CryptoTaxCalculator with xDai means this process has become easier than ever for xDai’s user base.
In just four steps, starting with copying a wallet address and culminating with pasting it into CryptoTaxCalculator, xDai’s users can sync their wallets and import their data for sorting and analyzing. More so, it supports taxpayers in over 20 countries, including the USA, Canada, UK, Australia, and most of Europe.
In addition to this, their services are less expensive than bringing unsorted data to an accountant who will charge a hefty premium for what will take hours to accomplish. Many accountants who are familiar with crypto and DeFi use CryptoTaxCalculator already. Subsequently, users who complete this step on their own can save themselves from inflated service charges tacked onto their tax preparation bill.
Of note, CryptoTaxCalculator’s fees are charged yearly with tiers ranging from $49/yr to analyze 100 transactions with limited features up to $299/yr for 100,000 transactions including every feature available. Considering the value DeFi has provided many of xDai’s users, this service comes as a bargain.
Great Idea: Do Your Crypto Taxes
Paying taxes is an unavoidable part of life, and there’s really no way to get around it. The Wall Street Journal has reported that the IRS will be increasing its efforts to track down crypto investors who have not paid their taxes. Rest assured, nations around the world will follow suit as they pursue tax revenues that may have remained hidden on the blockchain.
The penalties for tax avoidance can grow to enormous sums outweighing anything a DeFi trader has ever accumulated while trading. By doing their taxes, DeFi users can avoid headaches far worse than getting liquidated on an under-collateralized crypto loan, which, by the way, is counted as a taxable event.
As mentioned before, there are myriad actions within DeFi that are considered taxable events, and many of these are not apparent to their users. Forbes recently pointed out that many new crypto traders are facing a nightmare come tax time due to this knowledge gap. With the integration of xDai and CryptoTaxCalculator, it’s now easier than ever for xDai’s users to stay up to date with their tax liability and gain insights into the implications of all their moves.