Presenting ‘Overhaul’ Changes
US Customers Only
Coinbase just released a tax tool for it’s US customers. This is obviously a reaction by Coinbase to protect its clients, and satisfy the IRS due to a subpoena sent to them at the beginning of the year. It demanded Coinbase turn over all the personal information connected to every customer using Coinbase to the government institution.
A couple weeks later Coinbase decided to let it’s customers know that they planned on resisting the IRS’s aggressive advances, and would not so easily give up the goods. In the end the American based exchanged agreed to give up to 13,000 users’ personal information, and trade history, on suspicion that they failed to pay federal tax on their cryptocurrency profits. Considering the IRS was after more than 500,000 users’ info, that is not so bad.
If you are a customer of Coinbase, the tool will generate a single report with all buys, sells, sends, and receives of all currencies associated with your Coinbase account. This report will provide your cost basis for all purchases, and proceeds for all sales, inclusive of Coinbase fees. This information is necessary to determine your gains/losses. Be aware that transactions with payment reversals, and refunds may not be reflected in the report.
Automatic Calculatins of Gains and Losses
The report will only detail transactions associated with your Coinbase account. In order to create a complete view of your digital asset investments, you will need to download similar reports from all other exchanges you have used. The tool automatically calculates your gains, or losses based on a first-in-first-out (FIFO) accounting method.
Of course FIFO is only one of several methods you can use to calculate your investment performance. You can specifically identify to your tax professional the assets you sold, or exchanged. This is also a common approach for traditional investments, but requires a significant effort from you.
The report will only be accurate if you have not completed transactions outside of Coinbase. If you bought, or sold digital assets on another exchange, sent, or received digital assets from a non-Coinbase wallet, sent, or received digital assets from another exchange, (including GDAX) stored digital assets on an external storage device, participated in an ICO, or previously used another method to determine your gains/losses.
Just for reminder, two weeks ago Coinbase has denied rumors that they will be adding Ripple’s XRP token to its existing trading pairs. Coinbase Twittered rumors, saying that a January statement about listing new cryptocurrencies – which details how a “committee of internal experts” ultimately makes those decisions – hadn’t changed.
Author: Steven Johnson