Errors in Crypto Tax Software: How Our Technical Rectification Prevented €27,600 in Undue Taxes

Cryptocurrency taxation presents a challenge that few investors understand until it’s too late: automatic tax calculation tools systematically fail when there are operations on decentralized exchanges (DEX). And this failure is not a mere technical error. It can result in the payment of tens of thousands of euros in taxes on gains that never existed.

The case we analyze today, technically investigated by Cryptoveritas 360, demonstrates that correct taxation does not begin with tax calculation. It starts much earlier: with technical rectification, balance reconstruction, and forensic verification of each transaction. Without this preliminary work, any tax declaration is a game of Russian roulette.

This is a clear success story. The intervention of Cryptoveritas360 allowed for the correction of serious errors in the client’s crypto operations and prevented the declaration of non-existent gains. Thanks to this pre-taxation work, the client achieved significant tax savings, avoiding the payment of taxes that were not due.

The case demonstrates that, without specialized blockchain analysis like ours, many taxpayers assume unnecessary fiscal risks with a high economic impact.

1. The Problem: When Software Shows a Parallel Reality

An investor with active operations on centralized and decentralized exchanges approached the firm after detecting a serious anomaly in their automated tax reporting tool.

The software indicated that the client had at some point held over 3 BTC in their operational history. The problem: their actual balance had never exceeded 1 BTC.

This error was not a minor detail. Under Spanish tax law, capital gains derived from cryptocurrencies are taxed under the savings base of personal income tax (IRPF), with progressive tax rates ranging from 19% to 28% depending on the bracket.

An erroneous balance can generate a tax bill completely disproportionate to the taxpayer’s economic reality, as was the case here, with an incorrect additional tax cost of €27,600.

The client faced three simultaneous problems:

• Identifying the technical origin of the error (where did the software fail?)
• Reconstructing their actual operational history from 2021 to the present
• Quantifying the tax impact of declaring with incorrect data

But above all, they needed something no automatic tool can offer: a technical analysis prior to any tax calculation. Because without correct data, the world’s most sophisticated taxation is useless.

2. The Technical Challenge: Why Tax Tools Fail with DEX

The complexity of the case lay not in the number of operations, but in their technical nature and the absence of structured files.

– Mixed operations on CEX and DEX

The client operated recurrently on decentralized platforms. Unlike centralized exchanges, which allow downloading CSV files with all operations, most DEX do not offer this functionality. Transactions exist, they are recorded on the blockchain, but there is no “export history button.”

This means that any tax software relying on CSV imports is, literally, blind to DEX operations.

– Unrecognized operation types

Automatic tax tools are designed to interpret:

• Crypto purchases with fiat
• Crypto sales to fiat
• Transfers between wallets (sometimes)

But they systematically fail with:

• Swaps between tokens (direct exchange BTC → ETH without passing through fiat)
• Bridges between blockchains (moving USDT from Ethereum to Polygon)
• Interactions with smart contracts (staking, liquidity pools, yield farming)
• Internal movements between wallets of the same user

Each of these movements requires specific tax treatment. But the software, failing to recognize the nature of the operation, applies default criteria that artificially inflate balances.

– Errors accumulated since 2021

The client’s history dated back to three full tax years. Each software error in one year affected the next, creating a domino effect of fictitious balances that carried over year after year.

A superficial review was not enough. It was necessary to reconstruct the economic reality from scratch, year by year, transaction by transaction.

3. Our Intervention: Technical, Forensic, and Tax Analysis

This is where the distinctive work that only Cryptoveritas 360 can offer comes into play.

There is a widespread misconception in the crypto tax sector: most people—and many professionals—believe that the problem begins and ends with “calculating taxes correctly.” But correct taxation begins long before tax calculation.

Without real data, without verified balances, without technical reconstruction of each movement, any tax declaration is a house of cards. That’s why we approached the case as what it truly was: a job of forensic analysis, data cleansing, and reconstruction of the client’s economic reality.

This pre-taxation work, which is essential, was made possible by Cryptoveritas 360. Here’s how we worked on this particular case:

Phase 1: Correct Information Extraction

We assisted the client in the complete and correct download of CSVs from each centralized exchange where they operated.

This phase seems trivial, but it is where many subsequent errors originate:

• Duplications from unknowingly exporting the same period twice
• Omissions from not including all available operation types (withdrawals, deposits, staking, interest)
• Formatting errors that cause the software to misinterpret dates, amounts, or asset types

Cryptoveritas 360 ensures that the initial database is correct, complete, and free of redundant information. Without this initial cleansing, any subsequent analysis is contaminated from the source.

Phase 2: Reconstruction of the Actual Balance

We requested the client’s actual current balance on each exchange and wallet. This verified balance acts as a control point: if the historical reconstruction does not precisely match that balance, we know there are errors to correct.

From that control point, we reconstructed all operations year by year, backward, verifying:

• That each entry had its corresponding exit
• That intermediate balances matched the actual balances at all times
• That no operation was duplicated, misclassified, or misinterpreted

This manual process is laborious, requires expert judgment, and is the only way to ensure tax consistency across fiscal years. Without this preliminary technical rectification phase, performed by Cryptoveritas 360, the taxation would have been incorrect by design.

Phase 3: Specialized Analysis of DEX Operations

This is where Cryptoveritas 360’s most distinctive technical know-how comes into play.

Given the absence of CSVs on many decentralized platforms, we applied our know-how to:

• Directly analyze transactions on public blockchain explorers (Etherscan, BSCScan, Polygonscan)
• Identify swaps and internal movements not recognized by tax software
• Manually reconstruct the necessary information for correct tax attribution

Specific examples of operations we corrected:

• Swaps misinterpreted as sales: The client had exchanged ETH for USDT on Uniswap. The tax software interpreted this as “sale of ETH for euros” (generating capital gains) followed by “purchase of USDT with euros” (artificially increasing the balance). In reality, it was a simple exchange between assets, with no fiat counterpart.

• Internal movements accounted for as sales: The client moved BTC from their Metamask wallet to their Binance wallet to sell. The software interpreted the outflow from Metamask as a “sale,” and then the inflow into Binance as a “new purchase.” Result: the same BTC accounted for twice.

• Bridges between blockchains duplicating assets: When moving USDC from Ethereum to Polygon via a bridge, the software saw an “outflow of USDC” on Ethereum and an “inflow of USDC” on Polygon, but did not recognize that it was the same asset. Result: duplication of the balance.

Each of these errors artificially inflates gains. And when accumulated over three years of operations, the distortion is brutal.

Thanks to the forensic analysis performed by Cryptoveritas 360, we were able to identify, document, and correct each of these anomalies, reconstructing the client’s true economic reality.

4. Our Result: How the Client Avoided Paying Approximately €27,600 in Undue Taxes

After completing the technical rectification performed by Cryptoveritas 360:

✓ Balances matched reality
Fictitious holdings of 3 BTC no longer appeared. The history reflected the client’s actual balance at all times, year by year, asset by asset.

✓ Taxation was recalculated according to Spanish regulations
With the real data, we were able to correctly apply IRPF rules, without inflating non-existent gains or generating fictitious tax obligations.

✓ The client obtained a solid and defensible basis
All information was organized, documented, and ready to be presented to the Tax Agency with complete peace of mind. If an inspection occurs, every piece of data is backed by its corresponding blockchain transaction.

This result is not “taxation” itself. It is what makes correct taxation possible. It is the essential preliminary work, made possible by Cryptoveritas 360.

Tax Impact Avoided by Our Team

To illustrate the magnitude of the error we corrected, let’s make a conservative approximation of the economic impact.

In Spain, capital gains derived from cryptocurrencies are taxed under the savings base of personal income tax (IRPF), with rates that can reach 19% to 28% depending on the bracket.

In this case, the software error incorrectly reflected a holding of over 3 BTC. For practical purposes and to illustrate the economic impact of the error found, let’s take a conservative reference price of €40,000 per BTC.

Those 3 non-existent BTC would have amounted to:
→ €120,000 in fictitious capital gains

Applying an approximate effective taxation of 23% (middle bracket), the client would have had to pay:
→ ≈ €27,600 in undue taxes

Thanks to the technical intervention of Cryptoveritas 360, this amount was completely avoided.

Not because we “optimized taxes.” Simply because we corrected the economic reality before calculating it for tax purposes.

Why is this case relevant to you, who operate in crypto?

This case demonstrates something fundamental that many cryptocurrency investors are unaware of:

Relying exclusively on automatic tools to declare cryptocurrencies, especially when operating on DEX, can lead to costly errors.

Tax software is useful as a starting point, but it has structural limitations:

• It does not read blockchain directly
• It does not recognize the technical nature of DeFi operations
• It does not distinguish internal movements from asset transfers
• It accumulates errors year after year

Correct taxation begins with correct data. And correct data can only be obtained through prior, specialized, and, when necessary, manual technical analysis.

At IN DIEM Abogados, together with Cryptoveritas 360, we transform complex histories into clear, precise, and defensible tax information, helping our clients avoid risks and undue payments.

If you operate on DEX or have doubts about your cryptocurrency taxes, contact us before filing your declaration.

Expert review can make all the difference.

At IN DIEM Abogados, we are a firm specialized in cryptocurrency taxation and new technologies. Together with our technological partner Cryptoveritas 360, we offer a comprehensive service that combines technical, legal, and tax analysis.

Our services include:

✔ Complete Crypto Tax Reports: With detailed traceability, correct tax classification, and support before the Tax Agency.

✔ Advice for submitting the 2025 Income Tax Return: We prepare and submit your IRPF in a secure and optimized manner.

✔ Regularization of previous years: Full reconstruction of complex histories, wallets, and movements.

✔ Defense against requirements or penalties: We respond to the Tax Agency for you with all the necessary legal documentation.

✔ Personalized attention by an expert lawyer: Direct 24/7 contact to resolve doubts and accompany you throughout the process.

✔ Maximum confidentiality and professionalism: Your information will be treated with absolute rigor.

If you operate with cryptocurrencies, we help you declare correctly and avoid risks.

Contact us. We are here to help you.

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