Coinbase, the largest cryptocurrency exchange in America, has updated its tax tools to help its US customers comply with IRS guidelines for reporting digital asset gains.
Coinbase Updates Tax Tools For U.S. Customers
While not being legal or tax advice, Coinbase’s post may prove to be very useful to US customers afraid of failing to report their taxable digital currency sales and exchanges. Customers can now prepare their tax filings in three easy steps: establish a complete view of the customer’s trading activity to determine the cost basis; calculate gains/losses; file taxes.
To establish a complete view of trading activity to determine the cost basis, customers must create a complete view of all digital asset transactions. By clicking here, Coinbase customers are able to generate a single report with all buys, sells, sends, and receives of all currencies associated with their Coinbase account. Data with all costs and proceeds from purchases and sales, including Coinbase fees, are necessary to determine gains/losses.
“Please be advised that transactions with payment reversals and refunds may not be reflected in this report. Remember, this report only details 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 statement said.
To calculate gains/losses, customers have to subtract cost basis from the proceeds for each individual sale or exchange. Adding the gains/losses from all sales and exchanges will give a read of the total gain/loss for the year. As there is no standard guidance from the IRS on how to apply your cost basis to individual sales or exchanges of digital assets, Coinbase refers 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