When you did a tax extension but realized that crypto taxes are broken…

Since I first learned about crypto taxes last year, I knew they were going to be a pain. However, it has been far worse than I could have imagined. And believe me when I say that I WANT to pay my taxes properly. I genuinely do, but doing so accurately is nearly impossible. I’m not just talking about the lucky non-US countries or folks who only trade on Coinbase or Binance a few times. I’m also talking about people who do DeFi, bridge assets, transfer between exchanges, staking crypto, yield farming, liquidity pools, NFTs etc.

So some backstory, I filed an extension with the IRS and submitted an estimated payment two months ago. So now I have till October to figure things out, and the expected payment will ensure that I do not have to pay interest penalties. But here’s the problem, I have no idea where to begin. Last year, I was fortunate enough to make some money trading some crypto but it almost feels like the government wants to take the small earnings I got. In order to prepare for taxes, I have to keep track of all of these hundreds of transactions.

If you have farming tokens that go to zero, deposits on AAVE, COMP, or bridging an asset to another blockchain, all the swappings etc. all of them are taxed. And those are just a few examples. Working with the exchanges was also a hassle, and their documentation doesn’t help either.

I ignored all of my concerns after seeing dozens of crypto tax software. After testing a dozen or more crypto services, including CryptoTrader, Cointracker, ZenLedger and others, I discovered that a lot of them were giving me the wrong numbers. This was due to my extensive bridging and DeFi work. One of the better ones I tried was Cointelli. It had the most user-friendly interface for making changes to transactions and gave more accurate numbers. Still, even with all that, I have a long way ahead of me before I upload to TurboTax.

It’s times like this that I wish they can just audit me and send me the bill. It almost feels like we’ll have to figure out how much tax we’ll have to pay them on our own, and if we’re wrong, they’ll prosecute us. The way I see it, the IRS really needs to rethink how it taxes crypto, and if we just stand by and let them tax everything and their mother, I believe things will only get worse. And to me, many of these measures are plain unfair to the typical HODLER.