Coinbase, one of the most popular cryptocurrency exchanges, announced on January 24 a new Tax Center feature on both its app and website. This new tool will help users determine how much taxes they owe on their crypto transactions.
According to the IRS, digital assets are considered property. Crypto holders need to report them as capital gains or losses. To achieve this, they need to track each transaction, which can be a complex task in cases where there are many transactions.
While numerous cryptocurrency tax software solutions are already available, these tax tools usually come at an additional expense some traders are not willing to agree to.
The new feature will present Coinbase users with “a personalized summary of [a customer’s] taxable activity on Coinbase, broken out over time by realized gains/losses and miscellaneous income.” The feature will also support transfers between external exchanges and include other decentralized finance (DeFi) services and wallets. Up to 3,000 of these types of transactions will be available to Coinbase users for free through CoinTracker.
Users can also export this personalized summary and send it to their accountant. There is also the option to import it into popular tax software apps.
Even though exchanges are bound by law to report all transactions to the IRS, users still owe a significant amount of taxes on cryptocurrency. Confusion around how to pay this type of tax is often cited as the reason for failing to meet one’s tax obligations, so Coinbase’s initiative to remedy the situation is laudable.
The new feature will undoubtedly be a significant step toward simplifying the process of reporting crypto gains and losses.
What’s more, the announcement also said that Coinbase would work on issuing guides and help videos throughout the upcoming weeks. These will certainly help streamline the process even further.