Ledgible Tax defaults to calculating taxes using the First-In First-Out (FIFO) calculation method. If you wish to change the tax method for a client to Last-In First-Out (LIFO) or Highest-In-First-Out (HIFO), see the instructions below.
Warning
Changing your tax method has a large impact on your tax data and can affect tax liability for multiple tax years. This action should not be performed without a clear understanding of the impact. See questions 39 through 41 of theIRS's Virtual Currency FAQ for more information.
If you do change your tax method, you must re-run the tax update process to update all transaction data under the new method. Please note this process may take a long time to complete.
Tax Calculation Methods
- FIFO: Stands for First-in First-out. The first coin that was purchased (chronologically) is the first coin that is applied for a disposal.
- LIFO: Stands forLast-in First-out. The last coin that was purchased is the first coin that is applied for a disposal.
- HIFO: Stands forHighest-in First-out. The highest cost coin that was purchased is the first coin that is applied for a disposal.
To change the client's tax calculation method:
- Open the client's account from your Client Management dashboard.
- Select the Settings button on the top right.
- Scroll down to Tax Settings and click Change next to Tax Calculation Method.
- Change the Select Tax Calculation Method drop down menu to the desired method. You can select from FIFO, LIFO, or HIFO.
- Review any messages regarding historical data if shown and select Confirm if you wish to continue.
- Select Close on the confirmation window to return to the client dashboard.
- Re-run the Tax Update process to update all transaction data under the new method. Please allow ample time for this process to complete.