Coinbase, one of the largest and most popular cryptocurrency exchanges, is adding a new tax center to its app and website to help US customers work out how much they might owe to the IRS as a result of their crypto transactions, the company has announced. The section is designed to gather every taxable transaction into one place to simplify matters come tax day.
Although cryptocurrencies like Bitcoin often appear similar to the fiat money we’re accustomed to, in the eyes of the IRS, the digital assets are actually property, according to this FAQ from the federal agency. That means cryptocurrency transactions may need to be reported as capital gains or losses, and that means keeping track of a cryptocurrency’s value as it’s bought and sold over time. Documenting these transactions can get complicated quickly if you’re regularly buying and selling.
The information can be passed to an accountant or used with tax software
According to Coinbase, its new section will show “a personalized summary of [a customer’s] taxable activity on Coinbase, broken out over time by realized gains/losses and miscellaneous income.” This information can then be taken to an accountant or used with tax software like TurboTax. If you’re someone who’s transferred crypto to external exchanges, wallets, or other DeFi (decentralized finance) services, then Coinbase says its customers can also get tax reports for up to 3,000 of these transactions free with CoinTracker.
CNBC reported last year on suspicions that a lot of the taxes due on cryptocurrency transactions are going unpaid. Although confusion about the evolving tax rules about cryptocurrencies is one reason for this, another is that exchanges like Coinbase have historically not given as much help as traditional brokerage houses to customers when it comes to reporting their gains and losses for tax purposes.
The new Coinbase tax section is accessible from the profile icon in the top right-hand corner of the interface, where “Taxes” will appear as a menu item. In its app, the Taxes section is accessible from the “Profile & Settings” menu, accessible from the top left of the app’s interface. In addition to the new tools, Coinbase is also planning to offer written guides and help videos in the coming weeks to explain cryptocurrency and digital asset taxes, but for now, this overview from CNET is a helpful place to start.