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Having recently had to report more than 13,000 of its customers to the US Internal Revenue Service (IRS), making tax filing management easier for Coinbase is a must. The company has launched a tax calculator, but it won’t be of much use to many of its customers, including those who have traded with GDAX, stored cryptocurrency in a hardware wallet, or invested. in an ICO.
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San Francisco-based cryptocurrency exchange Coinbase has announced updated tax tools, now available to make it easier for its traders to report. The services are not designed for automatic reporting but rather as a method to help clients and their real tax professionals by simplifying the work.
Traders can to have a complete view of all digital asset transactions through generateis lying a single report with all purchases, sales, shipments and receipts of all currencies associated with their Coinbase account. This report provides a cost basis for all purchases and proceeds from all sales, including foreign exchange charges. This is necessary to determine the gains or losses, calculated by subtracting the base cost of the product from each individual transaction. The lack of a clear standard guideline from IRS tax professionals can be creative, but two approaches are common: first in, first out (FIFO) and specific identification (SpecID).
The company reminds customers that âin order to create a complete view of your digital asset investments, you’ll need to download similar reports from all of the other exchanges you’ve used. But if you haven’t used any other exchanges, Coinbase has an additional tool just for you.
For cryptocurrency traders who have only bought or sold on Coinbase, the exchange now also offers a new tool that automatically calculates gains or losses based on a FIFO accounting method. The company says this tool provides a preliminary gain / loss calculation to help its clients, but “should not be used as official tax documentation without validating the results with your tax professional.”
The company cautions that you cannot use this tool if you have: bought or sold digital assets on another exchange; Sent or received digital assets from a wallet other than Coinbase; Sent or received digital assets from another exchange (including GDAX); Digital assets stored on an external storage device (i.e. Trezor, Ledger, etc.); Participation in an ICO; Previously, you used a method other than FIFO to determine your gains / losses on investments in digital assets.
How do you calculate your taxes on bitcoin exchanges? Share your thoughts in the comments section below!
Images courtesy of Shutterstock, Coinbase.
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