Post
Topic
Board Service Announcements (Altcoins)
Re: CoinTracking - Profit/Loss Portfolio and Tax Reporting for Digital Currencies
by
allanster
on 15/03/2019, 17:39:13 UTC
Wayne,

First of all I am just a user same as you, offering what is hopefully some constructive help. CoinTracking allows you to have multiple accounts, and they can be linked together, meaning only that you will see them each as tabs at top of parent account for easy access, but they won't interact or interfere with each other. The linked accounts inherit the same capabilities as your parent account. If you had Ultimate for example, then all of the linked accounts will inherit that status as well. So I would start with creating a 2nd user account and linking it to your main account. For convenience you can even use the same email address for additional account(s). I have my paid master account which contains all transactions from all sources, I then have several linked accounts which contain only transactions from each individual source, and finally I have 2 linked test accounts which I use for testing and learning the solution to various questions I encounter in my own use. This will allow you to sort out your issues in an isolated environment, as well as backup and restore different test scenarios to that test account environment. It will also allow you to switch between the various accounts without having to log in and out into each of them separately.

Time is one thing to watch out for. You need to insure that you have your transactions translating across timezones correctly. You may see that a transaction happened at 3am on the exchange but which 3am? Their 3am? Your 3am? UTC 3am? CoinTracking does a great job for the most part of handling all of this automatically for you, but you need to always keep an eye on things to ensure that if you have your account set to your timezone that the transactions you are importing are translating correctly to your timezone. Otherwise your "fair value" would be way off.

There are certain areas in CoinTracking that it relies on an average price across several exchanges to obtain "fair value". This is an accepted (and required) accounting practice in most parts of the world. In the US for example the user is free to choose what source they will use for "fair value" as long as it is within reason and the user does not deviate from that source for that reporting period. In other words, you don't get to pick and choose your "fair value" source as a means to reduce your tax liability. You can't use a "fair value" source that says bitcoin is worth more when you buy it and then switch to a different "fair value" source that says bitcoin is worth less when you sell it. Most countries accept (and/or require) you using this as your "good faith" attempt to accurately report gain and loss.

If you are entering transactions correctly, then your tax calculations should be correct. If you purchase 1 BTC from CoinBase for $5k and later sell it back to fiat on CoinBase for $7k, and you imported those transactions into CoinTracking, it will correctly calculate your gain as $2k. The "fair value" at those times may be different but in those transactions CoinTracking will use the actual fiat values reported from the fiat exchange and will be correct. In other circumstances where you exchanged BTC for LTC is where the "fair value" would be utilized. It must be done this way because the exchanges do not provide the fiat value at that time of those non-fiat coin to coin transactions.

Imagine your friend gave you a share of Apple stock and you later sold it on an exchange for $1k, what was it worth when you received it? It's actual value varies depending on where you look and when you look, but you can't just tell your tax authority "Well I didn't report that because there is no 'real' way to look up what it was worth at that moment I received it". That won't fly with them, they will tell you that you should have looked up the "fair value" and reported it.

I am not a financial advisor and none of this post is financial or tax advice, but your tax authority discusses "fair value" here and in my opinion agrees with what I have stated above:

"Fair value can be measured in reference to the:
quoted market price in an active and liquid market, if available
current or recent market prices for the same asset or similar assets
net present value (if an established cash flow can be identified)
depreciated replacement cost – for specialised assets that are not traded in an active and liquid market."

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Market-valuations/Market-valuation-for-tax-purposes/?anchor=Meaningofmarketvalue

I have tried multiple accounting solutions for cryptocurrency, most of those solutions cost exponentially higher, and my own experience has been they do not provide all of the key features necessary while CoinTracking does. Hope that helps.