Coinbase wants to help customers file cryptocurrency taxes for the 2021 tax year.
The crypto exchange company said in a blog post that a new section in its app and website would help customers report capital gains or losses from cryptocurrency exchanges they made last year to the IRS. A personalized summary of taxable activity can then be taken to an accountant or used with tax software.
"Customers will see all of their taxable activity in one place to determine if they owe taxes, and how much. If they've taken more advanced steps like sending or receiving crypto from Coinbase Pro or external wallets, they can receive free tax reports for up to 3,000 transactions from our crypto tax partner CoinTracker," wrote Lucy Aziz, a product manager at Coinbase. "The most complicated time of the year just became more clear."
Aziz added that last year, customers were left with the tedious and time-consuming task of researching which transactions were considered taxable and then manually tracking and sorting them to calculate their gains/losses. The new tax center simplifies this process by using the initial value of a customer's crypto and then showing taxable activity over time by realized gains/losses.
The company also said it would offer helpful guides and videos in the coming weeks to further explain how to handle taxes related to cryptocurrency and other digital assets like NFTs.
The IRS broadly defines crypto transactions, including the sale of cryptocurrency for cash, exchanging one virtual currency for another, and using crypto debit cards to pay a merchant. Individuals must also report all receipts of cryptocurrency earned as income, including mining crypto, receipts of airdropped tokens, and payments received in the form of cryptocurrency.
Reports show that the cryptocurrency market grew from $1.44 billion in 2020 to $1.63 billion in 2021. By 2025, the value of the cryptocurrency market is predicted to be 2.73 billion, and experts say that 90% of the global population will adopt cryptocurrencies in the next decade.
The adoption of cryptocurrencies will inevitably mean more Americans paying for crypto taxes. A recent survey from crypto trading platform Voyager Digital revealed that 61% of Americans said they're likely to purchase some form of crypto this year, which they will have to pay taxes on.