What to Check Before Trusting Crypto Tax Software With Polymarket

Before you trust crypto tax software with Polymarket, test it with one number you already know: all the money you put in, minus all the money you took out, adjusted for your open positions. If the tool's result isn't close, it's mishandling something. The usual culprits are unredeemed losers, a proxy wallet that's been missed, and token events it doesn't understand. General crypto software was built for coins, not for outcome shares that settle at $1 or $0.

OddsFile is software, not tax advice. The IRS has not issued guidance on how prediction-market contracts are taxed. This article explains the options and the sources behind them; a tax professional can tell you which position fits your situation.

The cash test

This takes a few minutes and works with any tool.

Compare that with the tool's lifetime net across all tax years, adding back any rewards it reports separately. If you deposited $5,000, withdrew $1,000 and have $500 left, you're down $3,500. A report that shows a gain has a problem. Before you think about taxes, the numbers have to match reality.

Nine things to test

1. Does it read the right wallet?

Your positions usually sit in a proxy wallet, not the wallet you log in with. A tool that scans your login address may find almost nothing. Check that your trades appear.

2. Does it settle unredeemed losers?

Polymarket losers are rarely redeemed, so there's no on-chain sale. A tool reading only transactions leaves them open forever, and your profit is overstated. Count "open" positions on markets that have ended. See unredeemed losing positions.

3. Does it use the resolution date?

Check a loser. Its loss should appear around the market's resolution, not on your redemption date, and not at the end of the year. Look at a market that ended near New Year in particular.

4. Are redemptions matched to the right token?

Redemption data can be thin, sometimes showing only the outcome index and not the token. If a redemption shows as an unexplained deposit with zero basis, your gain is overstated.

5. Are fees included?

Polymarket's taker fees can show up as the gap between what you paid and shares times price. If a tool uses shares times price, your basis is wrong. See Polymarket fees and taxes.

6. Does it handle pUSD?

Polymarket replaced USDC.e with pUSD in April 2026. Tools that haven't caught up may misread wraps as sales, or treat pUSD as an unpriced token. Look at April and May 2026 in your report. See Polymarket pUSD taxes.

7. Does it read splits, merges and conversions?

Those events can look like two free tokens arriving, or tokens vanishing. Check for sales with zero cost, which usually means a missing acquisition. Filter your report for a basis of $0.

8. Does it separate rewards?

Liquidity rewards and holding rewards are likely ordinary income. A tool that mixes them into trading profit, or misses them, gets the character wrong. Check that small daily payouts appear as income and that they then have a basis.

9. Can it show you the treatment?

Most crypto software assumes capital treatment. That may be the position you want, but it's an assumption. If you might use gambling treatment, you need gross wins and losses by market, which a list of disposals doesn't give you without more work.

Red flags in a report

Questions to ask a vendor

• Do you read proxy wallets on Polygon?
• How do you close resolved positions that were never redeemed?
• Which date do you use for a resolution?
• Do you support pUSD and the CLOB V2 contracts?
• Do you import from a public address, or must I upload a CSV?
• Which cost basis methods do you support, and does the rule apply by wallet?
• Which outputs go to a preparer: Form 8949, an audit trail, or something else?

If the answer is "we treat every token as a coin," expect to fix things by hand.

Should you still use software?

Yes, usually. A wallet with hundreds of trades can't be done sensibly by hand. The aim isn't to avoid tools, but to check them, and to know what they're assuming. If you use a general tool for your coins and a specialized one for prediction markets, make sure they don't double count the same wallet. Remove one of them from the import.

For Kalshi, there's a similar check: compare your tool's number with Kalshi's P&L statement, which uses FIFO and includes fees.

Before you file

1. Run the cash test.
2. Look through your ten biggest gains and ten biggest losses by hand.
3. Filter for zero-basis disposals.
4. Check the year-end markets.
5. Save the report and your notes. See how long to keep records.

Run the free OddsFile check: paste a Polymarket or Hyperliquid address and see your 2026 P&L under each treatment, no signup. Use it as a second opinion against whatever else you're using. If two tools disagree, the cash test will usually show which is right.

FAQ

Why does my crypto tax software show a big Polymarket gain?

Most often, it has counted redeemed winners and ignored unredeemed losers.

Can I just use a CSV upload?

You can, if your export contains fills, fees and redemptions and the tool understands them. Check that resolutions are handled.

Do these tools decide my tax treatment?

No. They apply an assumption. The decision belongs to you and your preparer.

Is the tool's Form 8949 ready to file?

Treat it as a draft until it passes the cash test.