Add override/migration for cost-tracking (IRS 2025 regulations)
in progress
S
Slim Hare
From Koinly:
Read about the upcoming changes here:
These changes only affect US users that are using the universal cost tracking methdod.
---
User request:
As per the IRS, fro 2025 onwards we are required to use wallet based cost-tracking, previously universal cost-tracking was acceptable (and has been the default for Koinly). So if we do not separate our cost-tracking for each wallet we will be out of compliance with the IRS.
As it stands, changing to wallet based cost-tracking causes large discrepancies to all previous tax years. If we want to change to wallet based cost-tracking from 2025 onwards, it involved an extremely complicated process of creating a second Koinly account and migrating every token.
With the new IRS requirements, it would be great if an 'add override' feature could be made available for cost-tracking (similar to what we currently have for cost basis). This would enable us to switch from universal to wallet based from 2025 onwards, hence being in compliance with the IRS without negatively affecting all previous tax years.
P
Petur
in progress
Hello everyone!
We have finally released proper guidance on the methods that will be used fro the IRS tracking migration.
Please find details and FAQ in this article:
https://support.koinly.io/en/articles/10289123-migrating-to-wallet-based-cost-tracking-under-new-irs-guidance-usa-only
In short:
- To qualify for the safe harbor, you need to select your allocation method before January 1st, and document which method you will use. You do NOT need to perform the actual migration, or even get all of your books in order prior to January 1st (common misunderstanding).
Koinly is only planning to offer a single option for the allocation method, so this will be selected fro you automatically, and you will receive an email with documentation before EOY.
- The actual migration might be ready on Jan 1st, but it may not be be ready until later in January. The migration itself can be executed at any time in 2025, since it will only affect 2025 calculations onwards. The only thing that needs to be done prior to 2025 is the documenting of the allocation method that you intend to use (this is because you are not allowed to change your mind later about the method you will use)
Please see the article for more info, but no further action is required from users at this time
C
Coming Porpoise
Petur Thanks so much for implementing this! For users which are already using wallet based cost accounting, is any action necessary? I would think that that no action is required.
P
Petur
Coming Porpoise
Good question!
If you are already using wallet based tracking then these changes do not affect you at all :)
Added to the article as well
P
Petur
Merged in a post:
IRS RP 2024-28 Cost Basis Report
S
Solid Kingfisher
Per IRS and Koinly blog post: Rev. Proc. 2024-28, introduces a safe harbor for allocating unused basis in digital assets, which becomes effective starting January 1, 2025. The safe harbor allows taxpayers to allocate unused basis to digital assets they hold at that time.
To get ready for the 2025 IRS reporting requirements, we need a report that provides the following for all assets: asset type, date of purchase, cost basis, and current wallet.
This report is required by Dec 31 to satisfy the IRS safe harbor deadline. I understand that Koinly is working on a feature that will allow a user to move from universal to wallet-specific cost tracking without impacting prior years. This feature can be released in early 2025 without any impact. However, the wallet-specific cost basis report being requested is required before YE 2024.
P
Petur
Merged in a post:
Migrate to wallet-based cost tracking
Jack
I want to be able to use Wallet-based cost tracking from a specific year so I want to have the option to migrate from universal cost tracking to wallet-based.
Lots in wallets without physical balances (of a particular asset) should be transferred to wallets with balances but without physical lots (because they were already spent)
P
Pewter Pigeon
Unfortunately, doesn't look like Safe harbor Part of the new IRS change we will be able to use Koinly for that part in time, but based on my rough understanding from the CryptoTaxAudit guy the Safe harbor isn't a requirement but an option to help clean up past years and their cost basis.
BUT Safe Harbor will importantly give you clear cost basis to help protect yourself from IRS by having a better record and history of actual cost basis per wallet and token. ,
Without Safe harbor you just need to switch to wallet based and FIFO fo everything for the 2025 tax year.
Koinly says they will be adding a lock to previous years function to wallet based. So it doesn't affect previous year when switching to it.
Unfortunately stuck in the same place as the rest.
Also Switching to specific identification method instead of FIFO will actually have better tax savings.
C
Combined Toucan
OK so I see the setting to enable per-wallet cost basis, which wasn't not enabled on my account! I enabled that now. when was this added? I didn't even know that was an option. But even if I did before I don't think I knew what was the right option. Until now, with IRS rules saying it needs to be per-wallet. But it sounds like this still isn't exactly what we need, or only part of it. right?
Also, I enabled this option and I only see a cost basis per asset, not per wallet. I assume that's because its not fully implemented?
I'm a bit worried as well. And maybe this is the wrong place to ask, but it sounds like if we don't get this filed with our cost basis per wallet we could end up with a $0 basis, which would really screw us all big time! Is that right?
P
Petite Crawdad
Koinly just posted an FAQs regarding IRS Rev. Proc. 2024-28: https://www.reddit.com/r/koinly/comments/1hffewt/faqs_irs_rev_proc_202428_switching_from_universal/
I
Increased Crab
no updates yet?
T
Tan Gerbil
Yes, we definitely need this ASAP.
S
Specific Llama
+1 we at least need an unused cost basis report by Dec 31st, 2024
P
Primitive Toad
Very important!
Load More
→