Tax procedures for virtual assets is a complicated deal. Luckily, Coinbase, a digital assets exchange based in San Francisco has launched a cryptocurrency tax calculator to help its customers. Using the tool, investors will be able to reports their gains and losses while trading in cryptocurrency and ergo, keep up with U.S. tax requirements.
The IRS (Internal Revenue Service) and Coinbase have a long history of court battles with the former accusing Coinbase for aiding tax evasions. The IRS has been fighting Coinbase over data access since 2014 when they declared cryptocurrency as a taxable digital asset, rather than a form of currency.
Ultimately, in November 2017 the cryptocurrency exchange even ended up having to send information about thirteen hundred customers using their platform from 2013 to 2015 as per orders from U.S. district judge.
Following these events, it is expected for Coinbase to take some steps and address this problem pertaining to taxation of cryptocurrency. And so, in a blog post published on March 13, Coinbase announced their new tax reporting tools and that it will help customers generate a report which outlines their capital gain/loss on the platform.
The post reads, “for our customers who have only bought or sold digital assets on Coinbase, we offer a tool that automatically calculates your gains or losses based on a first-in-first-out (FIFO) accounting method.”
However, not all Coinbase users will be eligible to use the tool. As explicitly mentioned by the U.S. exchange, only customers who have exclusively used Coinbase to trade in digital assets can use the tool. Furthermore, a users’ participation in an ICO can also make them incompatible with the tool. These extra variables will make the Tax calculation impossible for the tool. Coinbase advises its users to not treat the report as “official tax documentation without validating the results with your tax professional.”
Now Coinbase is not the first to offer such facilities. Back in August last year, Node40 released a similar tax calculation software revolving around Dash, but it later expanded to other currencies as well as bitcoin.