Under IRS Rev. Proc 2024-28, we will be moving to wallet-by-wallet accounting for 2025. Before then, or your first activity in 2025, you need to make sure you have accurate records and balances across all your crypto wallets.
The IRS allows safe harbor for you to move your lots between your wallets to correct any balances.
A lot is a record of crypto that you bought, earned, or were given, for a particular price on a particular day.
For example, say I bought 1 BTC for a price of $10,000 on 1/1/2017, another 1 BTC on the same day at $11,000 and then 1.5 BTC at $10,000 on 1/2/2017. I have 3 lots:
lot 1: 1 BTC worth $10,000 from 1/1/2017
lot 2: 1 BTC worth $11,000 from 1/1/2017
lot 3: 1.5 BTC worth $15,000 from 1/2/2017
Because we have been using universal accounting, it may be that your wallets in bitcoin.tax do not match the balances with your actual accounts. Safe harbor lets you correct those balances.
For example, say my bitcoin.tax Closing report says I have 1.5 BTC in total, with 1 BTC in Coinbase and 0.5 BTC in my Ledger. However, when I check, I actually have 1 BTC in my Ledger and only 0.5 BTC in Coinbase.
Under the rules of safe harbor, I could move 0.5 BTC from the Coinbase balance to Ledger. Bitcoin.Tax can choose which lots to move, or you can choose to move based on a rule (e.g. Last-In first-Out), or you can pick and choose manually.
The safe harbor tool takes a copy of the closing report as its starting point.
Your then are trying to make sure the balances match those of your actual wallets/exchange accounts.
You do this by moving lots, or amounts, from one wallet to another until you get it the balances matching. You can also move lots between wallets, for example, if you were trying to put your oldest crypto in one wallet.
This means that the total balance should be correct in your Closing report first. If we think you have 1.5 BTC the you need to make sure you have 1.5 BTC across all you actual accounts.
Once you have completed it, you can download the Safe Harbor report, a CSV of all those lots, including their date of purchase, cost, and amount of crypto. This will also be used for your Opening for 2025 and would also be used to enter into any exchanges that request this information.
If the total balance of your actual wallets don't match bitcon.tax, then you need to make some appropriate adjustments in your Trading, Spending and Income. For example, if the Closing report for bitcoin.tax says you have 1.5 BTC but when you add up all your actual wallets, you only have 1.4 BTC.
Some transactions are missing from the 2024 or even in earlier years.
The best thing to do is find them and correct them. However, this could change the capital gains and tax for those past years, and might require you to amend your taxes for those years. Speak with your tax professional to understand what you should do and any potential consequences.
You can change the balances by, for example:
Once your Closing report is accurate per asset, you can create your Safe Harbor data and begin assigning the lots to wallets using whichever method you choose.