Resources/exchanges/Xero Integration Guide

Xero Integration Guide

Introduction

At CryptoTaxCalculator, we know how important it is for a small business owner, an SMSF or even an Accountant to have a product that integrates seamlessly with Xero. We built our Xero integration so that you can summarize daily trade activities into accounting journals within Xero. This will help you keep track of all of your crypto-related finances and help you understand sources of revenue, losses, and expenses. We’ve made the integration customizable so that your account mappings can be tailored to match the way you manage your book-keeping.

How to get started with our Xero integration

So, you’re ready to integrate your CryptoTaxCalculator records with your Xero account! Right now, this integration is in Beta. This means that users will have to submit a request by contacting our support team in order to get on our list to access the Xero integration feature.

Step 1:

In order to confirm your account integration, you must allow the CryptoTaxCalculator app to upload Manual Journals on your behalf by authorizing this action in Xero. To do this, navigate to the ‘Get Report’ tab in the CryptoTaxCalculator platform and click on ‘Download report’. From there, you can select the ‘Software integrations’ option and opt to connect to Xero.

Note: You will only be able to access the ‘Download report’ feature if you are a paid CryptoTaxCalculator user. Free accounts will not be able to access the Xero Beta feature.

Xero Integration CryptoTaxCalculator
Xero Integration CryptoTaxCalculator

Step 2:

Next, you’ll have to organize your account mapping. An ‘account mapping’ is basically a way to tell the CryptoTaxCalculator app what particular account to increase and/or decrease in certain situations. To make things easier, we’ve outlined the accounts that need to be mapped and what they should relate to below:

The ‘Cash’ account: This should be the account that decreases when purchasing crypto with fiat currency, and increases when purchasing fiat using cryptocurrency.

  • Example 1: You purchase $1000 AUD worth of ETH in March 2022. Your ‘Cash’ account would decrease by a value of $1000 AUD.
  • Example 2: You sell 1 ETH in April 2022 for the value of $3000 AUD. Your ‘Cash’ account would increase by a value of $3000 AUD.

The ‘Asset’ account: This should be the account that increases when the amount of crypto you hold increases or the value of the crypto you hold increases.

  • Example 1: You purchase $1000 AUD worth of ETH in March 2022. Your ‘Asset’ account would increase by a value of $1000 AUD.
  • Example 2: You purchase 1 ETH in April 2022 for the value of $3000 AUD. By May, this 1 ETH is now valued at $3500 AUD. In May, your ‘Asset’ account would now show an increase of $500 AUD in value.

The ‘Fee’ account: This should be a contra account that will track any fees that have been paid. As more fees are paid, the value in this account will increase.

  • Example: You transfer 1 BTC from your Binance account to your MetaMask wallet. To do so, you have to pay a fee worth $25 AUD. Your ‘Fee’ account would show an increase of $25 AUD.

The ‘Loss’ account: This should be a contra account for losses including: realized losses from margin trades, burning crypto or having your crypto stolen or lost. This should NOT be used to track capital losses.

  • Example: You authorize a transaction on a website to which your MetaMask wallet is linked, thinking that you will get an NFT in return for doing so. Instead, your MetaMask wallet is drained of its funds which held a total value at the time of $5,000 AUD. Your ‘Loss’ account would show an increase of $5,000 AUD once this transaction is marked as ‘Stolen’ in the CryptoTaxCalculator platform.

The ‘Expense’ account: This should be a contra account for expenses incurred while participating in crypto activities. This can include things like outgoing gifts, general expenses, and any personal use expenses.

  • Example: You purchase 5 BTC from a centralized exchange, that charges you a brokerage fee of 2% worth $1,000 AUD at the time. When this transaction is marked as an ‘Expense’ in the CryptoTaxCalculator platform, your ‘Expense’ account will increase by the value of $1,000 AUD.

The ‘Income’ account: This should be a contra account for income earned via your crypto activity. This can include things such as mining rewards, staking rewards, airdrops, royalties, gifts, and profit from mining trades. The value in this account will decrease as you continue to earn more crypto-based income.

  • Example 1: You participate in a staking program on your favorite DeFi protocol. A month into the staking program, you have earned an additional 100 SUSHI tokens worth $110 AUD at the time of receipt. Your ‘Income’ account would decrease by the value of $110 AUD, and assets would increase by $110 AUD.
  • Example 2: You claimed a unique ENS domain in early 2021. For doing so, you received 1000 ENS tokens as a reward through their airdrop, valued at $10,000 AUD at the time of receipt. When this transaction is marked as an ‘Airdrop’ in the CryptoTaxCalculator platform, your ‘Income’ account would decrease by the value of $10,000 AUD and assets would increase by $10,000 AUD.

The ‘Loan’ account: This should be an account for keeping track of your liabilities, which would decrease when you take out a crypto loan and increase when you make any crypto loan repayments.

  • Example: You take out a loan of 3 ETH via Blockfi, to the value of $10,000 AUD. Upon taking out the loan, your ‘Loan’ account would decrease by $10,000 AUD. After making your first repayment of 0.3 ETH to the value of $1,000 AUD, your ‘Loan’ account would increase by $1,000 AUD, to sit at a total value of $9,000 AUD.

‘Realized gain’/’Realized loss’ accounts: These accounts should be contra accounts that absorb the increase and/or decrease in the value of crypto assets you hold before they are disposed of. These accounts give you a method to calculate the gains or losses on your different crypto holdings. Currently, any losses are calculated using the First In First Out (FIFO) method.

  • Example: You hold 10 ETH in your MetaMask account, which is valued at $30,000 AUD in March 2022. You continue to hold your 10 ETH, but the value of your holdings drops to $20,000 AUD in May 2022. If you generate a manual journal at this time, it will show a decrease in value of $10,000 AUD.

Xero Accounts
Xero Accounts

Step 3:

Once you have completed your account mapping, you can click ‘Sync accounts’ in the Xero Integration settings, which is found Integrations section of the Settings page in the CryptoTaxCalculator platform.

Xero Account Mapping
Xero Account Mapping

Step 4:

Once you have synced your accounts, multiple accounting journals will be uploaded to your linked Xero account. You can re-sync these accounts at any time in the future by clicking the ‘Sync Accounts’ button in the CryptoTaxCalculator platform once again.

Step 5:

Navigate to your Xero tenant dashboard, and click on ‘Accounting’, then ‘Manual Journals’ (found under the ‘Advanced’ section). Click on ‘Drafts’ and you will find the Manual Journals uploaded by CryptoTaxCalculator. Our integration is built so that we generate a manual journal for every day you make a crypto transaction.

Xero Dashboard
Xero Dashboard

Note: The Xero integration doesn’t currently support updating transactions. Please make sure that your transaction history is reconciled, or else you may have to delete your past journals and re-upload them if you edit your transaction history.

A visual representation of how our Xero Integration works

Visual Representation of Xero Integration
Visual Representation of Xero Integration

Frequently Asked Questions

How do I disconnect from Xero?

  • Click the “Disconnect from Xero” button or Clear all data from your account

What doesn’t your integration do?

  • It does not upload the actual tax settings, it also only works using a FIFO inventory method

How do I re-sync with Xero after I have already synced once?

  • Simply click the “Sync Accounts” button and it will import any transactions since the last sync date.

The information provided on this website is general in nature and is not tax, accounting or legal advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider the appropriateness of the information having regard to your own objectives, financial situation and needs and seek professional advice. Cryptotaxcalculator disclaims all and any guarantees, undertakings and warranties, expressed or implied, and is not liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or Consequential Loss or damage) arising out of, or in connection with, any use or reliance on the information or advice in this website. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied. The information in this website is no substitute for specialist advice.

Shane Brunette

CEO

Shane Brunette founded CTC back in 2018 after dealing with his own crypto tax nightmare. He has worked closely with accountants and tax lawyers to make it easy for fellow cryptocurrency users to be tax compliant.

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