Coinbase has launched a new cryptocurrency gain/loss calculator to help its users keep up with IRS reporting requirements. In a blog post, Coinbase explained, "This tool provides a preliminary gain/loss calculation to assist our customers, but should not be used as official tax documentation without validating the results with your tax professional."
The calculator is most useful to crypto traders who did all of their buying and selling on Coinbase exclusively in any giving tax reporting period of interest. It generates a report which summarizes a customer's capital gains or losses on Coinbase, inclusive of Coinbase fees, using a first-in-first-out (FIFO) accounting method. The report does not include the customers sending of cryptocurrency into or out of their Coinbase wallet(s).
Coinbase explained on its website that the calculator is of very limited value for customers who are frequently active outside of Coinbase, including customers who: "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 (i.e., Trezor, Ledger, etc.), or participated in an ICO."
Coinbase was the target of a partially successful lawsuit by the IRS demanding information on users in an effort to expose possible tax cheats. The 13,000 affected Coinbase users are upset by the court-ordered release to the IRS of their social security number, Coinbase transaction records from 2013-2015, name, birth date, and street address. Further upsetting the affected Coinbase users and the cryptocurrency community at large is lack of IRS guidance on how to report crypto gains. The only official IRS guidelines released to date were posted here in 2014: https://www.irs.gov/pub/irs-drop/n-1oes4-21.pdf.
By: BGN Editorial Staff