In Brief:
- Coinbase launched a free tax center to provide tax assistance to its customers.
- This new offering allows customers to trace their taxable activity in one place.
Coinbase, one of the leading cryptocurrency exchanges, introduced a free tax center on its app and website to provide tax assistance to US customers as the IRS deadline approaches.
In previous tax seasons, many customers found difficulty in filing crypto taxes as they didn’t know if they owed taxes on their crypto activity. Taxpayers are required to report crypto sales, payments, conversions, and income to the IRS. These transactions may be taxed as either capital gains/losses or as regular income.
Earlier, customers had to manually track and sort which transactions were considered taxable which was really a tedious process. With the tax center, customers now can understand and file their crypto taxes easily by tracking their taxable activity in one place.
The tax center provides customers with details such as how much they owe taxes, including short and long term gains and losses. The new offering is significant since crypto owners previously had to manually calculate how much they earned and what tax rate applied to their profits.
The design of this new tool displays each customer a personalized summary of their taxable activity on Coinbase. These activities are sectioned into realized gains/losses and miscellaneous income. Customers can use these amounts to prepare and report their taxes with their personal accountants or directly via tax prep software like TurboTax.
Additionally, if users send or receive crypto from Coinbase Pro or external wallets, they can receive free tax reports for up to 3,000 transactions from the company’s partner CoinTracker.
However, there are some cases where coinbase may miss some information, for example when a customer receives crypto from an external wallet.
All of this comes at a time when the U.S. government is eyeing crypto taxes as a key new revenue resource. In November last year, President Biden signed the $1.2 trillion Infrastructure bill containing controversial crypto tax reporting. With the government’s increasing speculation in the crypto industry, it has become important for crypto firms to comply with evolving tax rules.
