To their credit, both TaxBit and CryptoTrader acknowledged upfront that their DeFi functionality was limited.
The other services claiming DeFi ability do not acknowledge any limited abilities on the main page. They do not make a disclaimer that the results are unreliable if unsupported protocols or tokens are used.
Total Proceeds and Total Cost
The Total Proceeds and Total Cost are the totals from the Forms 8949.
Note: Cointracker generated “ERROR” statements on an average of 10% of the lines on Form 8949 for all three benchmarks both in August and when run again in October. So all of their Total Proceeds are understated.
- This is the total income from all types of rewards that aren’t capital gains.
- This is the total gain (Total Proceeds minus Total Cost) plus Other Income. This is the amount on which taxes are paid. That a particular service has a result that is close to the manual calculation may be coincidental.
- This is the total number of transactions a service reports having found on the blockchain.
Total Lines on F8949
- The IRS Forms 8949 are where every taxable capital gain event is listed. So, the Total Lines states how many taxable capital gains events occurred according to the service.
Zero Cost Basis Lines
- This is the total lines on Forms 8949 showing a zero value for the cost basis. This usually means that the purchase price of a token could not be determined. Some services allow for a greater number of zero-cost basis lines as a shortcut to compensate for “loose ends”.
Gain with Zero Cost Basis
- This is the total gain (proceeds-cost basis) from lines showing a zero value for the cost basis on Forms 8949.
This is the total number of unique token types identified on the Forms 8949 and income statement. Most services don't count spam tokens, but they cant be hard to detect.
About the author
Clinton Donnelly is the founder of Donnelly Tax Law and CryptoTaxAudit. He is a leading expert on income taxes for crypto traders in the U.S. Preparing crypto returns since 2018, most of his clients are large traders. He has defended traders over 24 times in IRS audits of crypto income. He has authored five books and is a popular speaker.
CryptoTaxAudit offers tools for the average crypto trader to protect their wealth from the IRS. CryptoTaxAudit.com’s Audit Defense membership guarantees our experts will defend the member if selected for an IRS audit of their crypto income reporting. They also offer a DeFi Tax Benchmark for individuals as demonstrated in this report.