The IRS has clarified in their October 9, 2019, virtual currency FAQs (applies retroactively) that virtual currency can be accounted for using either first-in-first-out (FIFO) or specific ID methods.*
- Currently, we don't offer unit-by-unit Specific Identification as a cost-basis method.
- CoinTracker does support pre-set methods such as highest-in-first-out (HIFO), last-in-first-out (LIFO), and first-in-first-out (FIFO).
*highest-in-first-out (HIFO) and last-in-first-out (LIFO) are subsets of Specific ID accounting.
The simplest and most conservative method is FIFO. FIFO means that the first coin you purchase (chronologically) is counted for sale first.
LIFO means that the last coin you purchase (chronologically) is the first coin counted for sale.
HIFO means that the coin with the highest cost basis is the first coin counted for sale. By default, CoinTracker sets new accounts to HIFO, as this method generally results in the lowest tax bill.
With Specific ID, you identify exactly which coin is being spent at transaction time.
This identification can be ad-hoc or according to a pattern (e.g. HIFO, LIFO). The IRS states the requirements for Specific ID in here FAQ 40.
CoinTracker tax plans generate the detailed records you need to meet the Specific ID requirements by the IRS, such as HIFO or LIFO. However, we do not currently offer unit-by-unit Specific Identification as a cost-basis method.
In other (non-US) countries:
- Australia: the ATO requires specific identification when possible; otherwise, FIFO
- Canada: the CRA requires using Adjusted Cost Base (ACB). Your capital gains go onto your Schedule 3 Form (how ACB works)
- Germany: follows the same rules as the USA
- UK: follows share matching
You can change your cost basis method in the CoinTracker Settings. If you have questions, please consult your tax professional for guidance on your situation.
Disclaimer: CoinTracker is provided for informational purposes only. This service is not intended to substitute for tax, audit, accounting, investment, financial, nor legal advice. For financial, tax, or legal advice please consult your own professional. The information on CoinTracker is subject to change without notice. All information is provided "as is." CoinTracker disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Please see our full disclaimer.