YES, you need to upload all of your of your coin data (deposits, income, withdrawals, trades, transfers, etc) starting from your very first crypto transaction!
The IRS view of cryptocurrency is unique in that crypto is treated like fiat currency in some parts of the tax code, and like property in others.
- The currency treatment means that crypto income, dividends, interest, and gifts need to be reported.
- The property treatment means that capital gains and losses due to changes in value will be reported.
Because of this mixed-treatment and the volatility of coin value, ZenLedger cannot accurately calculate your tax liability without a full chain-of-custody for every coin, and we would not be liable for any misstated tax liability.
But I did not sell any coins in previous years.
Previous year incoming coins (e.g. from purchases, trades, gifts, forks, or income) contribute to basis which establishes the "starting point" for calculating gain and loss.
In US tax law, capital gain is the excess of sale price minus the amount you invested in the asset (i.e. basis), so you never pay tax on the return of capital. Without this starting point of how much you invested, many CPAs would agree, the most conservative tax position is to record the full amount as short-term capital gain which results in the highest tax rate for cap gains.
In this example below, a coin is sold for $900 in 2019.
- The coin was originally purchased in 2016 for $500.
- The accurate gain on the sale is $400 Long-Term Capital Gain ($900 sale minus $500 basis).
- Without the 2016 transactions, the conservative position is to record the full $900 as short-term gain ($900 sale minus $0 basis).
In a worse scenario, imagine the same coin was purchased for $1,800 in 2016.
- The accurate result is a $900 long-term capital loss ($900 sale minus $1,800 basis) which offsets capital gains from other assets to reduce overall tax liability.
- Without a starting-point basis transaction entered in ZenLedger, the conservative position is $900 short-term gain ($900 sale minus $0 basis) which is the exact opposite of the desired and accurate result.