The explosion of cryptocurrency prices in 2017 led to an equal explosion in wealth for heaps of investors. While many went mad with their money, spending it on Lamborghinis and the like, few considered the tax liabilities of their trading activities.
As cryptocurrencies in their nature are secure and relatively anonymous, a lot of people may decide to try their hand at evading taxes on many of these investments.
Others may simply struggle to know how they can calculate their crypto tax liabilities, as it is such a new aspect of the taxation process. This is why the team at Coinbase decided to release their own calculator for cryptocurrency taxes.
Coinbase’s new tool helps to calculate the gain or loss that a person has made as a result of their crypto trading. This was released to help keep their users in line with tax requirements in the United States.
They announced their release March 12, 2018, and outlined how this tool can generate a report that details the capital gains or losses that a specific user has experienced on Coinbase. This is done by utilizing the first-in-first-out (FIFO) accounting principle.
This tool is more aimed at those who have only used Coinbase for buying and selling crypto, as it doesn’t take into consideration digital currencies bought and sold on other exchanges or those who have invested in initial coin offerings (ICOs).
What this calculator offers is a way users can view their preliminary gain or loss calculation. Coinbase was also sure to state that it is not to be used in the way of official taxation documentation if a tax professional has not validated the figures.
This development comes after Coinbase sent a reminder to users about having to pay United States capital gains taxes, as well as having a permanent banner on the platform about this issue since January 2018.
Taxation and Cryptocurrencies
Cryptocurrencies and taxation have always been a thorny issue, as many government bodies see it as a way for criminals to hide their transactions from the authorities, as well general tax evasion.
It was in 2014 that the United States Internal Revenue Service (IRS) said they would be treating digital assets as taxable in a similar manner to property, rather than being as a currency.
Coinbase hasn’t exactly always been on good terms with the IRS, as they were on the receiving end of a lawsuit from the IRS, as the taxation authority wanted the US-based firm to provide them with information about their US users so that the authority could identify those avoiding their tax obligations.
Coinbase refused the request thus leading to a lengthy court battle. A US district judge eventually ruled that approximately 13,000 users on the platform from 2013 to 2015 would have their information sent to the authorities.