Coinbase Adds New Tax Tools

Coinbase has just released their new tax features to help users file their taxes according to current IRS tax guidelines.
The new guidelines state, gains on digital currency sales and exchanges are taxable events in the United States.

3 Steps To Complete Your Taxes For Coinbase Transactions

Step 1. Establish a complete view of your trading activity to determine your cost basis

This report provides your cost basis for all purchases and proceeds for all sales, inclusive of Coinbase fees. This information is necessary to determine your gains/losses. Please be advised that transactions with payment reversals and refunds may not be reflected in this report.

Step 2. Calculate your gains/losses

After determining your cost basis, you and your tax professional can calculate your investment gains or losses. Simply put, your gains or losses are calculated by subtracting your cost basis from the proceeds for each individual sale or exchange.

While there is no official guideline on how to apply your cost basis to individual sales or exchanges of digital assets. We’ve seen two common approaches:

• First in first out (FIFO) — This method assumes that the first assets you purchased are also the first assets you sold or exchanged. Your gain/loss is calculated based on the price you paid for the oldest assets in your portfolio, and the asset price at the time of sale or exchange. This is the most common approach for traditional investments.
• Specific Identification (SpecID) — This method relies on investors to specifically identify to their tax professional the assets they sold or exchanged. This is also a common approach for traditional investments, but requires significant effort from the investor.

Example:

Step 3. File your taxes

Once you have calculated your gains or losses on your digital assets investments, you are ready to file your taxes. Consult your tax professional on how to best report this information in your tax filing

 

Coinbase also offers a Coinbase-only gain/loss tool that will automatically calculate gains and losses (FIFO method) for transactions made only within Coinbase. If you have used other exchanges like Binance it is best to keep track of your transactions with a portfolio tracker like CoinTracking and consult with a tax consultant.

Many exchanges are international and will not report your tax information to the IRS so it is important to keep accurate records and self report when you file your taxes.

 

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