Gatehub and CryptoTrader.Tax Team Up to Bring Crypto Tax Reporting to Users
Gatehub and CryptoTrader.Tax have officially partnered up to bring a seamless tax reporting experience to users of the Gatehub wallet and cryptocurrency exchange. As the IRS has increased enforcement and awareness of cryptocurrency income and capital gains reporting requirements within the past year, cryptocurrency exchanges have started to look into creating easier ways to help their users report crypto gains and losses.
How Gatehub users can automate their crypto tax reporting
With this partnership, Gatehub users are now able to import their complete Gatehub transaction history file directly into their CryptoTrader.Tax account. All trades and transactions from Gatehub will be imported automatically. No manual adjustments are necessary.
With the click of a button, Gatehub users can then generate their crypto tax reports based off of their imported transaction history. Generated reports can be given to a tax professional or imported into preferred tax filing software platforms such as TurboTax or TaxAct. See how it works in the short demo video below.
How do cryptocurrency taxes work?
The IRS treats cryptocurrencies like bitcoin as property for tax purposes, not as currency. Just like other forms of property—stocks, bonds, real estate—you incur a tax reporting requirement when you sell, trade, or otherwise dispose of your cryptocurrency for more or less than you acquired it for.
In this sense, cryptocurrency trading looks similar to trading stocks for tax purposes.
For example, if you purchased 0.2 Bitcoin for $2,000 in May of 2018 and then sold it two months later for $3,000, you have a $1,000 capital gain. You report this gain on your tax return, and depending on what tax bracket you fall under, you pay a certain percentage of tax on the gain. Rates fluctuate based on your tax bracket as well as depending on whether it was a short term vs. a long term gain. This applies for all cryptocurrencies.
Alternatively, if you sold your cryptocurrency for less than you acquired it for, you can write off that capital loss to save money on your crypto taxes.
We discuss the basic mechanics of crypto taxes in much greater depth in our blog post, The Complete Guide to Cryptocurrency Taxes.
The tax reporting challenge for exchanges
By design, cryptocurrencies are easily transferable. Cryptocurrencies are built to be sent from one wallet to another without friction. This user-centric feature is unfortunately what creates a tax reporting challenge for cryptocurrency exchanges and similar crypto-native platforms.
For example, if you buy $100 of XRP on Coinbase and send it to your Gatehub wallet for storage or more trading, Gatehub only sees that X amount of XRP entered your wallet. There is no way for Gatehub to know your cost basis in that amount of XRP (aka the $100, or how much you purchased it for). This cost basis is essential data for tax reporting.
Anytime you transfer crypto into or out of an exchange, the exchange loses the ability to give you an accurate report detailing your total gains and losses across all of your trading activity. This is because it does not have the cost basis and fair market value for all of your cryptocurrencies, both of which are mandatory components for tax reporting.
The solution to the cryptocurrency tax problem for exchanges hinges on aggregating all cryptocurrency data making up your buys, sells, trades, air drops, forks, mined coins, exchanges, swaps, and received cryptocurrencies into one platform so that you can build out an accurate tax profile containing all necessary data.
CryptoTrader.Tax is a platform built to enable this solution. By integrating with all major exchanges and cryptocurrency platforms, users are able to aggregate the entirety of their cryptocurrency data into the app. CryptoTrader.Tax is then able to assign cost basis and fair market values for every cryptocurrency transaction—buy, sell, or trade. The platform will also track wallet to wallet transfers of crypto from one exchange to another.
Creating an account and importing your trades is completely free on CryptoTrader.Tax. Get started today, or learn more about how it works here.