Add more allocation methods for IRS tracking migration
closed
P
Petur
If you would like Koinly to add multiple options for the US cost-tracking migration, you should:
- Upvote this ticket in order to receive updates via email. You will then receive a notification whenever an update is posted by Koinly
- Look through the comments below and upvote/like the method that you would prefer. If you don't see a method that you like, you can add a new one as a comment
- Please check your email for updates, or log into your Koinly account before the end of the year to check if any new methods have been added
When adding a comment, the description needs to be very clear and contain:
- The order that your holdings (lots) will be allocated to your wallets
- The order in which your wallets should be filled
The default method will be "Lowest cost → Biggest wallet". You can read more about this method in the FAQ below.
Example methods:
- Oldest holding to oldest wallet (this would order your holdings based on the date of acquisition, and place the oldest holdings in the wallet with the oldest transaction)
- Most expensive holding to the least active wallet (this would order your holding by the cost per coin, and place the most expensive holdings in the wallet with the fewest transactions)
There are a lot of potential ways to allocate the holdings, but we won't be able to implement many methods. The deadline for selecting a method is midnight in Jan 1st (00:00 in your local timezone). Any user that hasn't selected a method before this date will be assigned the default method. If no method receives a significant number of votes, then we will only be offering the default method.
Additional tips:
- Simple methods are more likely to get approved than complex methods
- Koinly staff may edit comments in order to improve the clarity/description
- You will only be able to select a single method for your whole portfolio. Each coin/token will be allocated separately, but the method used for the allocation will be the same
- This migration will only affect holdings that are split between multiple wallets. Any coin/token that is located exclusively in a single wallet will not be affected at all
- It is possible to optimize the migration by transferring specific coins to specific wallets, but this needs to be done before the end of the year (see FAQ)
Please also check out this article and FAQ for more information and tips:
Thank you all for your feedback and suggestions. We really appreciate it :)
Jack
Merged in a post:
From Universal to Wallet Specific Cost Basis Allocation Methods
S
Safflower Canid
This is by far the least effort and worst handled safe harbor migration I've ever seen. Not only did you try to piece this together less than 1 month before the deadline but Koinly failed to listen to users. As a prospective customer I am shocked and appalled at how ill conceived and unplanned and unthought out this migration was and providing no options to users on an issue that can have significant implications on future taxes depending on what wallets users sell from.
As a prospective customer I cant even transition to Koinly even though I initially wanted to because you dont or wont support my current allocation method from my other software. There must be hundreds of new users that ditched Koinly cause they couldnt provide choice in allocation method nor allow them to select the safe harbor allocation method from their previous provider. This clearly demonstrates Koinly's lack of planning, improper project management and it sure seems like not even a tax professional was even consulted based on this ill conceived lowest cost to highest wallet allocation method which is idiotic at best and perhaps works for very few people nor what is recommended by most tax professionals. Koinly needs to provide options for users to select their preferred allocation method and needs to allow matching to other platforms options or transitioning new users will be impossible. Get a clue. Jeez.
S
Safflower Canid
This is by far the least effort and worst handled migration I've ever seen. Not only did you try to piece this together less than 1 month before the deadline but Koinly failed to listen to users. As a prospective customer I am shocked and appalled at how ill comceived and stupid this migration was and providing no options to users on an issue that can have significant implications on future taxes depending on what wallets users sell from. As a prospective customer I cant even transition to Koinly even though I initially wanted to because you dont or wont support my current allocation method from my other software. There must be hundreds of new users that ditched Koinly cause they couldnt provide choice in allocation method nor allow them to select the allocation method from their previous provider. This clearly demonstrates Koinly's lack of planning, improper project management and it sure seems like not even a tax professional was even consulted based on this ill conceived lowest cost to highest wallet allocation method which is idiotic at best.
Jack
Safflower Canid: Which allocation method were you interested in?
The method we used basically said "put lowest cost lots to my long-term vault wallets" and assumed long-term vault wallets were the ones with highest balances.
If easier, you're welcome to contact our support via our in-app chat - if you do, please refer the agent that picks up the chat to this post so it's routed to the correct place.
E
Energetic Puma
What about those that do not believe this new tax law is worded the way it is being interpreted and enacted in reference to what is considered a “wallet”?
Am I able to skip the migration and maintain my current settings even as a US customer?
P
Petur
Energetic Puma: Yes. You can delete the migration from your settings before it gets triggered (assuming that it has been created automatically for your account)
P
Petur
Hello everyone,
There seems to still be a lot of confusion as to how the allocation methods work and what is possible to do.
As explained in the original ticket, an allocation method needs to dictate the order of how the assets will be allocated, but also in which order the wallets will be filled.
A method such as 'Highest cost allocated first' does not explain which order the wallets will be filled. This kind of method can only be used in cases where the wallets can be ordered manually, but we will only offer a global method where the wallets will be ordered automatically (based on a specific criteria, in our case it will be the size of the wallet's holdings).
Another common misunderstanding seems to be that the allocation method will somehow be able to determine the order in which your coins will be sold. This is not correct, since the allocation will only be used to distribute your total holdings between your wallets. Your cost-basis method (FIFO, HIFO, LIFO, etc) will then be used to determine the order in which these holdings will be sold.
Unfortunately, we will not be able to offer multiple allocation methods, so all migrations will be using the method "Lowest cost to Biggest wallet".
This method will place your cheapest lots in your largest wallet (measured only by the balance of that specific coin), and the more expensive lots will then be placed in your smaller wallets.
If this method does not suit you, then you could transfer your coins between your wallets in order to optimize the allocation as best suits you.
M
Main Ladybug
Petur ---Thank You for clearing up some of the confusion. I thought that the IRS will only allow FIFO from Jan 1st forward, is that correct? And if it is correct, will the FIFO be specific to the (cold storage) wallet one chooses to transfer the crypto to another wallet or exchange?
T
Tangerine yellow Halibut
Petur thanks for the clarifications, but IMO this is not fully clear.
> we will only offer a global method where the wallets will be ordered automatically (based on some criteria).
Based on what criteria? Rev Proc 2024-28 says we're supposed to document the allocation method, which you've told us will be "Lowest cost to Biggest wallet", but that doesn't make clear what the intra-wallet ordering is, nor does "some criteria".
P
Petur
Tangerine yellow Halibut
Sorry for that, I've updated the comment now to clarify this.
For the cost-tracking migration, there is no such thing as "intra-wallet ordering".
The sole purpose of allocating your lots is to split them up between your wallets. The allocation method does not have any say in how the lots will be ordered for future sales.
What you are referring to is the cost-basis method (FIFO, LIFO, etc). Your cost-basis method will continue to determine the order in which your assets get sold, even after your assets have been allocated between your wallets
P
Petur
Main Ladybug
The IRS will continue to allow Specific Identification in addition to FIFO (Spec ID includes other methods such as HIFO and LIFO). It is however still somewhat unclear how using Spec ID will work when it comes to the reporting requirements for centralized exchanges, but this will surely get clarified before these reporting requirements come into effect in 2026.
T
Tangerine yellow Halibut
Petur
> For the cost-tracking migration, there is no such thing as "intra-wallet ordering".
There must be such a thing within the algorithms of your software, otherwise you'd not be able to determine the cost basis when you sell less than all of a wallet's holdings of a particular asset.
> What you are referring to is the cost-basis method (FIFO, LIFO, etc). Your cost-basis method will continue to determine the order in which your assets get sold, even after your assets have been allocated between your wallets
Thanks for clarifying. So since Koinly isn't giving us any way to access the Specific IDs, in the US, so long as we're using Koinly, we're stuck with FIFO going forward, correct? (If so, then what I called the "intra-wallet ordering" would be FIFO/chronological.)
S
Safflower Canid
Petur This is by far the least effort and worst handled migration I've ever seen. Not only did you try to piece this together less than 1 month before the deadline but Koinly failed to listen to users. As a prospective customer I am shocked and appalled at how ill comceived and stupid this migration was and providing no options to users on an issue that can have significant implications on future taxes depending on what wallets users sell from. As a prospective customer I cant even transition to Koinly even though I initially wanted to because you dont or wont support my current allocation method from my other software. There must be hundreds of new users that ditched Koinly cause they couldnt provide choice in allocation method nor allow them to select the allocation method from their previous provider. This clearly demonstrates Koinly's lack of planning, improper project management and it sure seems like not even a tax professional was even consulted based on this ill conceived lowest cost to highest wallet allocation method which is idiotic at best.
H
Heliotrope Owl
Highest cost allocated first (+1)
J
Jacinth Koala
add the plan highest cost allocated first. this method would allocate everything i owned before 1.1.25 in order from highest cost to lowest cost. the highest cost lots would be allocated first to assets on hosted wallets then to assets on unhosted wallets in order of acquisition date, from oldest to newest. this means that starting in 2025, when the default acccounting method switches to FIFO, all sells, trades, spends or transfers of assets owned before 1.1.25 will pull first from highest cost units allocated to each wallet and exchange. this approach will generally result in deferring gains and accelerating losses. i have moved my btc around a lot and your plan of "lowest cost, biggest wallet" would not be great, because i don't necessarily have all my lowest cost btc in the highest balance wallet as i engage in a lot of defi with new wallets, borrowing with btc as collateral and such.
it seems "highest cost allocated first" SHOULD DEFINITELY BE THE DEFAULT METHOD FOR EVERYONE.
B
Brick red Raccoon
Please add: Highest Cost- Highest Wallet Balance
P
Petur
marked this post as
closed
Hello everyone,
Thank you all for your feedback and suggestions!
It seems like there isn't so much demand for any specific alternative allocation method, so we will only be offering the default method for this migration
T
Tangerine yellow Halibut
Petur will/can Koinly be optimizing this for long term capital gains in the US?
B
Brick red Raccoon
Petur that's prety ridiculous to offer one method.
S
Salmon Reptile
Petur, your feedback thread wasn't open for an adequate amount of time, and still, you received feedback that Highest Cost Allocated First, should be added. I second that opinion, and would very much NEED to see that added, as it complies with my own allocation plan. As a Koinly Subscriber, for a number of years, I'm kind of married to Koinly now. Please do add this immediately.
W
Working Koi
Petur I am very unhappy with Koinly's handling of this migration. This is very important for US Customers. There are other crypto tax softwares that have been ahead of this and better prepare their users for this migration. After Koinly's handling of this, I intend to switch to a different software going forward. There are many ways to allocate unused cost basis, but only one option is given. Koinly appears incompetent. I have also documented this discussion thread to put in my tax files, to illustrate the level of service (or lack thereof) provided. I have been openly telling everyone in all the chat rooms I am in the horrible experience I have had with Koinly. I hope others switch to a better service and whomever had (or should of had) involvement with this at Koinly gets fired.
F
Flamingo pink Mole
Petur I hope Koinly takes this matter seriously and listens to US users vs pretending we had a choice or feedback oppty. Closing this thread is shortsighted and only points to a lack of planning and due diligence to better serve clients. At a minimum this method should be offered as an alternative:
Highest Cost Allocated First – This method would allocate everything you owned before 1/1/25 in order from highest cost to lowest cost. The highest-cost lots would be allocated first to your assets on hosted wallets then to your assets on unhosted wallets in order of acquisition date, from oldest to newest. This would mean that starting in 2025, when the default accounting method switches to First-In-First-Out (FIFO), our sells, trades, spends, or transfers of assets owned before 1/1/25 will pull first from your highest cost units allocated to each wallet and exchange as dictated by where the transaction and wallet it originates from.
V
Vivacious Antlion
The IRS only supports FIFO as of 1 Jan 2025. So, how does the migration of "Lowest Cost -> Biggest Wallet" get us there? I was using FIFO in Universal Mode and just want a smooth transition into FIFO in Wallet-By-Wallet mode. Do you have that option? I am assuming a lot of people are in this scenario.
T
Tangerine yellow Halibut
Vivacious Antlion I think you're conflating the safe harbor allocation w/ the cost basis calculation method.
That said, WRT the cost basis calculation method beginning in 2025, my layperson's read of Rev Proc 2024-28 is that it allows Specific Identification (SID), too, provided it is per-wallet, and lots are identified prior to disposals. SID is how other strategies are implemented (e.g. LIFO, HIFO).
P
Petur
Vivacious Antlion:
There is no need for you to change your cost-basis method. The migration from universal to wallet tracking is completely separate from your cost-basis method, so you can continue using FIFO
M
Main Ladybug
One of the most important things to U.S. taxpayer investors is Long-Term Capital gain (assets held over 1 year) verses Short-Term. The Tax Rate difference is substantial depending on which asset was sold. I therefore feel that it is essential to know which wallet contains the oldest coins, so "Oldest Holdings in Oldest Wallet" makes the most sense and has my vote.
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