How To Do Your KuCoin Taxes - Building Your Crypto Tax Forms
KuCoin has become one of the most prominently used cryptocurrency exchanges in the world. Many cryptocurrency traders use KuCoin because of its ease of use. The exchange also offers users a variety of crypto assets that aren't available elsewhere. Despite these features, when it comes to doing your KuCoin taxes and building out your required KuCoin tax forms, a number of challenges arise.
This article discusses these issues and explains the easiest way to build out your required KuCoin and cryptocurrency tax forms.
How Is Cryptocurrency Taxed?
The IRS treats cryptocurrencies 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 our blog post, The Complete Guide to Cryptocurrency Taxes.
KuCoin Taxes - Understanding the Problem
KuCoin actually does not have the ability to provide its users with necessary tax reports that are commonly received in the world of trading stocks for a number of reasons.
The first issue is that many trades on KuCoin are quoted in other cryptocurrencies. Because you need to be calculating the fair market value in your local FIAT currency at the time of your trades, this reporting becomes very problematic, and KuCoin does not track original cost basis or fair market value data across trades.
The second problem—and the much bigger one—comes about from the core nature of cryptocurrency. Because you are able to send crypto like bitcoin into and out of the KuCoin network, for example sending bitcoin from an outside wallet into your KuCoin wallet, KuCoin has no way of knowing at what cost (cost basis) you acquired that crypto for. Cost basis is essential data you need in the calculation of your crypto taxes.
We discussed this fundamental problem in greater depth in our blog post, The Cryptocurrency Tax Problem.
So KuCoin Can’t Provide Me With Necessary Tax Reports?
Even if KuCoin wanted to provide you with accurate tax reports to detail your capital gains and losses, they actually physically do not have the ability to because of the cryptocurrency tax problem. This is true of all major exchanges as well like Binance, Coinbase, and Kraken.
If KuCoin Can’t Give Me My Necessary Tax Forms, How Do I Get Them?
To properly build out your necessary crypto tax forms, you need to pull together all of your cryptocurrency data that makes up your buys, sells, trades, air drops, forks, mined coins, exchanges, and swaps across all exchanges that you use.
You can do this by hand by exporting all of your trade history files from your exchanges and doing the capital gains and losses transaction for each trade. Each tax event should be recorded on Form 8949 and your net gain should be transferred onto your 1040 schedule D. We walk through the manual reporting process in our article here: how to report cryptocurrency on your taxes.
Cryptocurrency Tax Software
Alternatively, you can use crypto tax software like CryptoTrader.Tax to automate the entire tax reporting process.
When using crypto tax software, you simply import all of your trading and transaction history from all of your exchanges into the platform. You can connect your KuCoin account directly to CryptoTrader.Tax with your "Read-Only" API key. The software will automatically sort and cleanse this data and produce your required tax forms with the click of a button. You can review the short demo video below to see how you can connect your KuCoin account and build your tax forms with CryptoTrader.Tax.
You can give these generated tax reports to your tax professional, file them yourself, or upload them into your favorite tax filing software like TurboTax cryptocurrency or TaxAct using the CryptoTrader.Tax partnerships.