No coin cost basis for taxes.

[u/All_for_love]

I have seen this is pretty common that Coinbase tax form can’t give a correct cost basis or give one at all. I have traded on Coinbase pro/gdax and stored in cold storage so my tax form doesn’t show a cost basis. My accountant first used 0$ cost so I am paying taxes on 100% of my trade (which was not even profit taking (just ETH to BTC) I now need to correct this with a manually calculated cost basis.

Question is if they can’t see the cost basis how can the tax man? Maybe I suck at trading and this coin cost basis is near current value? What is the risk of this?

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[u/pop-1988]

if they can’t see the cost basis how can the tax man?

He can not. That's not the point

Your tax return will be accepted. You will pay what you owe
Later - even 5 years in the future - some computer matching routine flags your old tax return for an audit

At an audit, you cannot prove your cost basis because you failed to keep adequate records
If the tax investigator thinks your estimated cost basis is reasonable, no problem

The simple answer is to keep detailed records as you go, so you don't have to make estimates later

[u/Order_Book_Facts → u/pop-1988]

This is correct. I guessed at my taxes in 2017 due to trading in multiple coins and flipping my entire stack many times (had $1M+ dollars in total sales, wayyyy less actual profit). It would have basically been impossible to calculate. I think my guess on profit was fairly accurate, as I sold my entire stack to cash at the end of the year and knew what I started with. The IRS never contacted me.

Plan to do the same thing either this year or next - guess. Again, I’ll go 100% cash, and I know about what my invested capital was.

[u/pop-1988 → u/Order_Book_Facts]

Profit from frequent trading is income, not capital gains. You don't need every transaction recorded, because your income for the period is the money you put in during the period subtracted from the total value at the end of the period

[u/mosehalpert → u/pop-1988]

So for us dummies in the back of the class who have only bought and held long term... we can just claim a cost basis of zero, an accurate purchase date of more than a year ago and as long as we are under 65k per year it's tax free? And down the road any tax auditor will look at the cost basis of zero and move on?

[u/pop-1988 → u/mosehalpert]

Don't expect reliable tax advice here. Consult a professional

[u/just_playing_through]

Use something like koinly. It'll track cost and gains. You can pay for it to do the tax forms as well (or export data into TurboTax or another tax program).

[u/uninspired → u/just_playing_through]

Have you used it yourself? I was considering it

[u/FootstepsFalco21 → u/uninspired]

I’ve used it, and while it can be cumbersome, I recommend it

[u/lVloogie → u/just_playing_through]

Koinly seems great so far. Cointracker is dog shit. If you transfer any crypto between exchanges, ledgers, etc, it just uses the cost of the token at the time it was transferred as your cost.

[u/Large_Sexologist_587 → u/lVloogie]

That's disappointing to hear. Weekly dca buys over years and then transferred to cold storage in a lump sum is gonna suck to get accurate basis when I sell.

[u/lVloogie → u/Large_Sexologist_587]

Try Koinly. You should start figuring it out now.

[u/bucs009]

They don't need to but if they ever audit you it's up to you to prove it not them.

[u/Pretend-Plumber → u/bucs009]

Yes, this. You will have to have a good faith estimate. Show how you came to it.

[u/Optimal_Law_4254]

If you don’t have a good record of the trade that includes dollar or other cash value, you can approximate it by finding the crypto value on the date/time of the trade. Because the value fluctuates (sometimes a lot) during the day it’s important to pick a price that is as close as you can get to what you actually paid. Intra day trading records can be very hard to find.

[u/MariachiArchery]

(which was not even profit taking (just ETH to BTC) 

Every trade is a taxable event. So, this statement is wrong. If you traded ETH for BTC, that is a taxable event. All trades are tax events. So, if you traded ETH for BTC, you've created a tax event on that initial ETH.

Buy ETH for $2000 on whatever date, trade ETH for BTC at $4000 on whatever date, now you owe capital gains on $2000.

If you don't know your cost basis, just guess. That is fine.

[u/cali_dave]

Just make a best effort and be prepared to explain your rationale to an IRS auditor if necessary. Take the highest/lowest/closing cost of the day you made the trade and use that as your cost basis.

If you're a day trader, you should know how to keep track of that stuff. Don't rely on an exchange to track things for you.

If you have timestamps of your transactions, you can query Coinbase's API to pull price data on a 1 minute time frame (if you need to get that granular).

[u/Express_Pace4831]

I seem to distinctly remember you buying it a month ago at the ATH cause you though it was going to the moon and now you're down.

[u/pbfarmr]

They don’t. And don’t care. Like your accountant, if there’s no reported basis, they assume a basis of 0

[u/ARoundForEveryone]

If you don't know how much you paid, how do you know if you're in profit or loss? Or do you not even know that?

[u/Silver-Dance-4810]

Falsifying tax returns is a felony in the US. You can be sentenced to prison. While an innocent mistake won't result in that (likely just a penalty plus interest), doing what you are asking would likely be viewed as intentional. You probably won't get caught if you are dealing with $1k, $10k, or even $100k. But the more dollars involved, the higher the risk of getting caught.

And keep in mind the IRS can look back 3 years for tax returns (more for intentional fraud). So if technology evolves OR if they just audit you and ask you to prove your cost basis (i.e. show the wallet transactions), you will get caught.

A good rule to follow is to pay your taxes. Taxes suck, but they are a part of life. Some in the crypto space try to use it to avoid taxes. But that is a great way to potentially ruin your life. And frankly, I feel no more sympathy for a crypto tax evader than any other type of tax evader.

But the short answer here is you will probably get away with it if you are talking about hundreds or thousands of dollars. But as the number gets higher, the risk gets higher. And you will have to worry about future tech and what may happen down the road, as you are not home free just because your tax return for 2025 filed in 2026 gets accepted.

[u/8512764EA]

I gave up trying and just put the cost basis at zero and paid. I don’t need the IRS sending me letters

[u/EarningsPal → u/8512764EA]

What about the lowest price possible in the year you purchased? It wasn’t $0.

[u/tianavitoli]

really easy to calculate in excel and you don't even have to actually do any math......

[u/Optimal_Law_4254 → u/tianavitoli]

Depends how complete and accurate your records are.

[u/tianavitoli → u/Optimal_Law_4254]

skill issue tbh

[u/FrodoDBaggin → u/tianavitoli]

Agreed, it’s not hard but takes a little time, which to be fair everyone should be doing anyways

[u/tianavitoli → u/FrodoDBaggin]

i'm not going to have any sympathy as i've gotten to sort through 1000s of transactions to substantiate what i already knew, that i lost money.

[u/Klizz]

You just submit your own form. Sale price, cost basis, submit with your taxes. Currently no one is obligated to send any information to the IRS, but even when they do you'll be able to correct the 0 basis by submitting your own records.

Keep records of your transactions to be able to prove the listed cost basis to the best of your knowledge and you're fine.

[u/ToxicBTCMaximalist]

Use coin ledger, they have software to track all of this and it costs about $50/year.

[u/2LostFlamingos]

Write down your trades when you make them.

Problem solved.

[u/bricarp]

Question is if they can’t see the cost basis how can the tax man?

The burden of proof is on you.

If you can not prove your cost basis, you'll find yourself in trouble.

The IRS doesn't have to prove that you lied. Instead, you have to convince the IRS that you didn't lie.

[u/uncapchad]

some info from AI searches:

swapping coin for coin; The IRS treats this transaction as if you sold the first cryptocurrency for U.S. dollars and then used those dollars to purchase the second cryptocurrency, even though no fiat currency is involved. Also makes a difference if you had it for 1 year or less.

If you do not know the cost basis for your Bitcoin, the IRS will generally require you to treat the cost basis as $0 for the purpose of calculating capital gains

While you can attempt to estimate your cost basis using historical price data from sources like CoinMarketCap or by using the lowest price within a specific time frame (e.g., the day, month, or year of purchase) as a conservative estimate , the IRS will not accept these estimates if they are not supported by adequate documentation.

Starting with the 2025 tax year, the IRS will require taxpayers to use a "per-wallet" or "per-account" cost basis method, meaning sales must be matched with the cost basis from the same wallet or exchange where the asset was acquired. transferring Bitcoin between wallets or exchanges does not trigger a taxable event, but the cost basis must still be tracked per the original source

[u/aguitarwar]

Can't you just look up how much money you transferred into CB and deduct that as the cost?

[u/na3than → u/aguitarwar]

No