Out of order transactions, especially out of order transfers, are a common source of issues for our users. In almost every instance, the transactions are out of order because one platform is not using UTC to record your transaction history, and the other platform is using UTC (Coordinated Universal Time).
UTC and its use in the Cryptoverse
UTC is the timezone agnostic way for the telecommunications and aerospace industries to talk about time. Many crypto platforms will use UTC in their transaction records to avoid problems inherent to doing business across the planet over the internet.
Not all crypto platforms follow this pattern, and will may select one or more timezones (an hour denominated offset of UTC) to record their transaction history. When there is a mismatch between the timezones being used to report your crypto transactions, we often see transactions out of order.
Why do my transactions need to be in order?
Funny you should ask! In general, TaxBit relies on your transactions being in chronological order to keep track of cost basis pools and eventually assign gains and losses to your disposals.
Out of order transfers are typically manifest by a transfer in transaction occurring before it matching transfer out. If you're using Specific ID/HIFO By Exchange as your accounting method, out of order transfers will result in missing cost basis as we're unable to connect those two transfers together and transfer the cost basis of whatever assets were being moved onto the new platform.
Buys, sales, and trades being out of order can cause issues if your transactions show you selling or trading away an asset that you bought after the sale/trade occurred. In this case, the issue is pretty simple, our records may show that, at least at the time the transaction occurred, you didn't own enough of an asset to cover that assets disposal.
Out Of Order Transaction Examples
Transfers out of order:
In the above example, the BTC transfer out on Platform A is chronologically after the BTC transfer in on Platform B. The two transactions are offset by 15 minutes, and our tax engine is unable to recognize that the two transfers are related and that they should be used to keep track of the cost basis for that BTC sale. (Hence the reason there is an 'Unknown Gains' flag next to that disposal.)
Buys, sales and trades out of order:
In this example, the buy transaction is chronologically after the sale transaction. As a result, we don't have any records of having 1 BTC across any of this users accounts to cover that 1 BTC sale. As such, there are no cost basis pools assigned to that disposal.
What can I do about it?
Most commonly, the sources that aren't listing transaction times in UTC are from CSV exports. In this case, fixing the timezone on those CSV exports is relatively simple and something you can reach out to our support team to help you resolve.
If you notice that your wallet or API integration sources are causing the out of order transactions, make sure that none of the platforms involved are coming from CSVs and let our support team know, and we'll look into the integration to see what our options are.