When preparing your crypto taxes, you may notice discrepancies between your wallet or exchange transaction histories and the items listed on Form 8949. This difference occurs because Form 8949 calculates taxes based on cryptocurrency disposals, taking into account sale dates, amounts, cost basis methods, and cost basis tracking.
The Condensed Form 8949 aggregates disposed amounts by cryptocurrency, making the discrepancies more apparent. These amounts are summed and appear under long-term and short-term gains based on cost basis settings, but the following examples assume you're only looking at the regular 8949.
Examples
Mixed holding periods
Scenario: You own 1 ETH, made up of:
- 0.5 ETH bought over a year ago
- 0.5 ETH bought six months ago
When converting the 1 ETH to cash on December 15:
- CoinTracker records it as a single transaction.
Form 8949 shows:
- One line item under long-term capital gains for the 0.5 ETH held over a year.
- One line item under short-term gains for the 0.5 ETH held less than a year.
This separation happens because tax treatment differs based on the holding period of each ETH portion, causing a mismatch between CoinTracker and Form 8949.
Cost basis method impact
Scenario: On December 15, you hold 1 ETH, which was purchased in two transactions:
- 0.5 ETH on November 1
- 0.5 ETH on November 15
If you sell 0.75 ETH on December 15, CoinTracker records a single transaction of -0.75 ETH. When generating Form 8949, you’ll see two line items under Part I for short-term capital gains (one for each purchase date of the sold crypto).
If your cost basis method is set to LIFO (Last In, First Out), the breakdown will be:
- 0.5 ETH purchased on November 15 and sold on December 15.
- 0.25 ETH purchased on November 1 and sold on December 15.
If your cost basis method is set to FIFO (First In, First Out), the breakdown will be:
- 0.5 ETH purchased on November 1 and sold on December 15.
- 0.25 ETH purchased on November 15 and sold on December 15.
These amounts won't match the sale transaction in CoinTracker or your exchange wallet. In this example, one of the original sale amounts is split, appearing as 0.25 ETH instead of the original 0.5 ETH. The split depends on the cost basis method (LIFO or FIFO).
Recurring buys and complex transactions
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.
Scenario: You sold 1 ETH all at once, but purchased it over two years with weekly recurring buys.
In CoinTracker, the sale is recorded as one transaction of -1 ETH. When generating Form 8949, you'll see a line item for each purchase date of the ETH that made up the sold amount:
- Some line items will be under Part I for short-term gains
- Some will be under Part II for long-term gains
To determine the sale amount, you'd have to add all of those amounts together.
This gets more complex with multiple sales/trades on different dates and amounts, combined with purchases made in various amounts at different times. The software determines which crypto is sold based on your cost basis settings, often leading to discrepancies where line items on the 8949 don’t match the sold amounts in CoinTracker transactions.
More resources
Learn more about information on cost basis methods and crypto taxes.
Disclaimer: CoinTracker is provided for informational purposes and is not intended as tax, audit, accounting, investment, financial, or legal advice. For financial, tax, or legal advice, please consult your own professional. Please see our full disclaimer.