Coinbase, one of the largest and most popular cryptocurrency exchanges, has announced the addition of a new tax center to its app and website to assist US users in determining how much they may owe the IRS as a consequence of their crypto transactions. The section is intended to collect all taxable transactions in one location to make things easier on tax day.
Although cryptocurrencies such as Bitcoin may appear to be similar to conventional money, the IRS considers digital assets to be property, according to this FAQ from the federal agency. That implies cryptocurrency transactions may need to be recorded as capital gains or losses, which requires keeping track of the value of a cryptocurrency when it is purchased and sold over time. If you purchase and sell on a regular basis, documenting these transactions may rapidly become cumbersome.
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 that there are concerns that many of the taxes owed on bitcoin transactions are not being paid. Although confusion over the evolving tax rules regarding cryptocurrencies is one reason for this, another is that exchanges such as Coinbase have historically not provided as much assistance to customers as traditional brokerage houses when it comes to reporting their gains and losses for tax purposes.
The new Coinbase tax area may be accessed by clicking on the profile icon in the top right-hand corner of the interface, where “Taxes” will appear as a menu item. The Taxes portion of the app is available via the “Profile & Settings” option, which is located at the upper left of the program’s UI. Coinbase plans to give written instructions and instructional videos to clarify cryptocurrency and digital asset taxation in the coming weeks in addition to the new tools.