Coinbase, one of the most popular cryptocurrency exchanges of the United States, has announced that it would release a tax reporting tool for its users in a blog post in this Tuesday (March 13). As the deadline for the Internal Revenue Service (IRS) is coming up on April 17, many users were asking for such a device and the exchange decided to give them what they want.
Not only the users pressured the company, as the IRS already had court battles over data access after some trouble with Coinbase in the past and allegations that the company might be helping its users to commit tax evasion.
How Will the Coinbase Cryptocurrency Tax Calculator Work?
Coinbase stated that the Coinbase Cryptocurrency Tax Calculator will help the users to generate reports which will easily let them visualize their gains of losses using the platform. A First-in-first-out (FIFO) method will be used to calculate the returns of the users. The company expects the calculator to help people who had trouble to calculate their gains by using such a volatile method as cryptocurrencies.
Since 2014, the US law determined that cryptocurrencies should be treated as investments and assets, not as currencies, so this measure helps the people who have the obligation to pay taxes for their gains.
Many People Will Not Be Able to Use the Coinbase Cryptocurrency Tax Calculator
Unfortunately, it looks like many people will be left out of this new tool’s efficiency. The user history will only be compatible with the program if the users have not bought or sold any of its currencies in other exchanges or sent or received any digital assets from a wallet which is not Coinbase based.
Also, receiving assets from other exchanges (even GDAX, which is a partner of Coinbase) and participating in ICOs or storing assets in external devices will make the calculator useless. This is bad, but at least the sole users of Coinbase have a new tool now.
Other IRS calculators for cryptocurrency includes Node40, which was released last year and focused on Dash, but it expanded after some time to Bitcoin and other tokens.