What is Missing Cost Basis and How Do I Resolve it?

Before diving headfirst into each flagged transaction, it’s important to note that we understand you may not be able to connect all of your sources if you have an unsupported source. If you are unable to resolve all of the flags in your account, it doesn’t prevent you from downloading your tax forms. For more information on your options if you are unable to resolve all flags within your account, read the article “Generating your 8949 with or without Missing Cost Basis".

Missing cost basis occurs when TaxBit is missing data, specifically transactions that record where and for how much you acquired your assets. Missing cost basis can also be caused when you are missing transfer transactions as each “Transfer Out” needs to be followed closely by a corresponding “Transfer In.”

MCB common causes troubleshooting guides

There are five common scenarios that most often cause missing cost basis. Follow the hyperlink in each scenario for a more detailed explanation of the problem and how to fix it:

1. Missing Transfer Data: Under SPEC ID/HIFO By Exchange, we need a transfer out and transfer in transaction that corresponds to each instance where a crypto asset is moved between platforms. 
2. Missing Acquisition Data: Buy and trade transactions are REQUIRED for us to be able to assign cost basis to your disposals, regardless of your accounting method. It's also important to ensure that your income transactions are included in your TaxBit account, and that they are labeled as such. Some platforms pass income transactions as 'transfer in' transactions and will need to be edited manually. 
3. Duplicate Disposals: Having duplicates of the same disposal will always use up more of your existing asset pools, and when paired with non-duplicated acquisition and transfer data, will often lead to cost basis issues. 
4. Transactions Out Of Chronological Order: Occasionally we'll see transactions not being reported to us in UTC. When that happens, it's common to see transfer and acquisition/disposal data appearing out of order. 

How do I know if I have missing cost basis?

To check whether or not you have missing cost basis transactions in your TaxBit account you can filter your Transactions page by clicking "Flags" and selecting "Missing Cost Basis." Once you do that, if you have any flagged transactions in your account, they will populate in a filtered list.

What are the two different types of missing cost basis? 

There are technically two different ways that you can see the missing cost basis flag on your transactions. One indicates full unknown gains and the other indicates partial unknown gains. 

All cost basis missing:

When you see the yellow "!" symbol next to the words "Unknown Gains" on your transaction, it means that TaxBit does not know how much any of the disposed asset was purchased for, so all of the cost basis is missing. If you generate your tax forms with full unknown gains transactions still in your TaxBit account, these transactions will not be included on your form 8949.

Partial cost basis missing: 

If you see the yellow "!" symbol next to a gain or a loss, then it means we are missing some of the cost basis. This means that there is enough data to identify how much you paid for a portion of the asset that was disposed of but not the entirety of it. If you generate your tax forms with a partial cost basis transaction, then your form will reflect the partial cost basis as the entirety of the cost basis. This can create the appearance of larger or smaller gains or losses than what was realized. For more options on how you can generate your 8949 with missing cost basis check out the article: "Generating your 8949 With or Without Missing Cost Basis Transactions".

Resolving "Unknown Gains"

When working to resolve missing cost basis it’s important to verify a few things first:

• Have you brought in data from every exchange and wallet that you have ever bought, sold, traded, received or held crypto on?
• For each exchange or wallet you have connected, are all your trade, transfer, buy, sale, income, and expense transactions showing?
• For each exchange or wallet, is your entire transaction history from 2014 until the end of 2022 (as applicable) represented in your account?

In short, we need to verify that we have EVERY transaction that has EVER occurred on ALL the platforms you’ve used. If you need help meeting one of these criteria, please reach out to our Customer Experience, and they'll be happy to help you get all your transaction data into your account.

Once you believe that the three statements above are true, there are three options for resolving your missing cost basis:

• You can add transactions to your account
• You can remove transactions
• You can modify a portion of the transactions already in your account

Picking a disposal

Now you’re ready to pick a disposal or group of disposals to focus on. For Sale and Expense transactions, the currency being disposed of is clear, as there’s only one currency involved. With Trade transactions, the currency being disposed of is always going to be to the left of the arrow, indicating which currency left your possession.

In the image above, I have several disposals on Crypto.com with missing cost basis. The currency and the platform in question are the two most important things to pay attention to. When you have your accounting method set to HIFO By Exchange and you see "Unknown Gains'' flags, here’s what TaxBit is trying to tell you: “At the time of this transaction, we don’t have enough of this currency on this platform to cover this disposal.”

So in my situation represented above, I need to figure out how that amount of VVS made it onto Crypto.com to be disposed of/traded at that time. Once I can answer that question, I’ll then need to either add to, remove from, or edit the transactions in the Transactions page.

Still have questions? You can interact with our Chatbot by selecting the Chat Widget located at the bottom right side of your screen, or fill out this form HERE to submit a support inquiry request. Our team is happy to help!