Why Line Items on Tax Form 8949 Do Not Match Transaction History

Why do line items on Form 8949 sometimes not match my transaction history?

When preparing taxes, individuals dealing with cryptocurrency transactions may notice discrepancies between their transaction histories in wallets or exchanges and the line items listed on Form 8949. This difference primarily arises because Form 8949 is designed to calculate taxes based on disposals of cryptocurrencies, considering various factors such as sale dates and amounts, the cost basis method set, and whether cost basis is tracked across all wallets universally or on each wallet individually.

Please note that the Condensed Form 8949 aggregates the disposed amounts by cryptocurrency, so it's more obvious why those amounts won't match transactions. The amounts are summed and appear under long term and short term gains according to the cost basis settings, so the same rules are being applied, but the examples below assume you're looking at the regular 8949..

Understanding the Discrepancies 

Example 1: Mixed Holding Periods

Imagine owning 1 ETH, comprised of 0.5 ETH bought over a year ago and 0.5 ETH bought six months ago. If you convert this 1 ETH to fiat on December 15th, CoinTracker records it as a single transaction. However, Form 8949 will list two line items for this conversion: one under long-term capital gains for the 0.5 ETH held over a year and another under short-term gains for the remaining 0.5 ETH. This separation occurs because the tax treatment differs based on the holding period of each portion of ETH, leading to a mismatch between the single transaction recorded in CoinTracker and the two distinct line items on Form 8949.

Example 2: Cost Basis Method Impact

Suppose it's December 15th, and on this date you hold 1 ETH. This is all the ETH you have. You just purchased it in two transactions, .5 ETH last month on November 1st, and .5 ETH on November 15th. If you sell .75 ETH today, the transaction in Cointracker will show -.75 ETH.

But when you generate the 8949, you'll see that you have two line items under Part I for short-term capital gains, one for each purchase date for the crypto sold. 

If you have the cost basis setting as LIFO (coin you bought last is the first sold), you'll see:

• .5 ETH purchased on November 15th and sold on December 15th
• .25 ETH purchased on November 1st and sold on December 15th. 

If you have the cost basis set as FIFO (coin you bought first is the first sold), you'll see: 

• .5 ETH purchased on November 1st and sold on December 15th.
• .25 ETH purchased on November 15th and sold on December 15th

Neither of these amounts corresponds to the amount of the sale transaction in CoinTracker or in your exchange account or wallet. In this example, one of the original sale amounts is split and appears as .25 instead of the original purchase amount of .5, and which purchase amount gets split depends on the cost basis method.

Example 3: Recurring Buys and Complex Transactions

For a more complicated but very common example, let's say you sold 1 ETH all at once, but you had purchased that 1 ETH slowly over two years as a series of weekly recurring buys. In CoinTracker, you'll have one transaction of -1 ETH for that sale. However, when you generate the 8949, you will see a line item for each purchase date for the ETH that made up the sold amount. Some of the line items would be under Part I for short-term gains, and some would be under Part II for long-term gains. You'd have to add all of those amounts together, and then you'd come up with the sale amount.
 
This becomes even more complex if you had many different sales/trades with various dates and amounts, with purchases also made in various amounts on different dates as the software determines which tokens are being sold based on your cost basis settings. This is also a very common case, and you might find that a large number of line items on the 8949 have amounts that do not correspond to sold/sent amounts on the CoinTracker transactions at all.