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Coinbase’s Tax Computing Tool and Issues With It

Coinbase’s Tax Computing Tool and Issues With It

For those who haven’t noticed, Coinbase has made life somewhat easier for cryptocurrency investors, through their rollout of a cryptocurrency tax computing tool. This will primarily help American cryptocurrency holders accurately deal with their cryptocurrency gains, which have been notoriously difficult for layman investors to account for in their tax forms.

This is also in all probability a welcome development for the Internal Revenue Service (IRS), which has expressed concern regarding that cryptocurrency investors may choose not to file their cryptocurrency returns. However, Coinbase is stressing the fact that the tool does not constitute professional legal advice.

Coinbase is the major cryptocurrency exchange in the US, and the new tool will undoubtedly ease concerns some investors have regarding how their cryptocurrency gains should be accounted for. Whilst the tool specifically follows guidelines set up by the IRS, meaning it is intended to be used solely by residents in the United States, it serves as in interesting comparison between different countries’ cryptocurrency tax regulations for non-US citizens.

In using the tool, investors are prompted to provide a complete history of their purchases and trades, as well as gains or losses incurred as a result of cryptocurrency investing. It then generates a single report and also includes any potential Coinbase fees that are tax eligible in any way, which is a welcome addition.

However, it should be noted that the tool is not perfect. Just like how it does not account for other nationalities with different tax accounting systems, it also does not include any cryptocurrency traded on other exchanges than Coinbase itself. The Coinbase blog also noted, in an entry on March 13th, that the tool is not suitable for those who’ve participated in ICOs.

Despite these limitations, the tax tool still represents an important step towards increasing the ease of tax returns. Looking taxes have cryptocurrency investors across the world scratching their heads, as the rules different from nation to nation, and sometimes the regulations are not at all clear.

In summary, this tax tool from Coinbase is a welcome addition to computing one’s taxes. However, more importantly, it highlights the currently somewhat unclear tax situation regarding cryptocurrencies. As cryptocurrency has experienced an atmospheric rise in popularity during that past year, the need for proper, comprehensive and consistent tax regulations for cryptocurrency becomes increasingly evident.

For now, exchanges are gearing up and providing their users with cryptocurrency tax guidelines in order to ease their tax reports. Nonetheless, it is clear that both investors and tax authorities alike would benefit from easier, more accessible tax regulations for cryptocurrencies. It remains to be seen what the situation will look like next time tax season comes around.

Image Source: “Flickr”


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