When it comes to tax reporting, not all crypto transactions are created equal.
For example - a transaction from your MetaMask or Coinbase wallet which appears to be a simple deposit of ETH could actually be a(n):
self wallet transfer
All of these "deposit type" transactions can have very different tax implications, which is why it's important to classify your deposits properly. The same holds true for "withdrawal type" transactions or "unmapped" transactions.
When you first import your crypto data to CoinLedger, the vast majority of transaction classification gets handled automatically. Still, there may be scenarios where CoinLedger isn't able to auto-classify your transactions. In these cases, you will want to manually classify your transactions into their correct type so the proper tax treatment gets applied. We will discuss how and when to do this this further below.
When do I need to manually classify transactions?
The most common scenario in which manual classification within CoinLedger is required is for:
Deposit transactions that were actually a form of income, and
Withdrawal transactions that were actually a disposal of your crypto
Let's say you receive a 1 ETH staking reward from the Ethereum blockchain to your Coinbase wallet. That same day, you transfer 2 ETH from your MetaMask Wallet, to your Coinbase wallet.
Within CoinLedger, each of these transactions will likely appear as generic 'deposit' transaction types, each to your Coinbase wallet. However, one deposit—the staking reward—was actually a form of income, while the other deposit was a non-taxable self-wallet transfer.
In this scenario, you will need to manually classify the 1 ETH staking reward to its appropriate 'Staking' transaction type. This will ensure CoinLedger recognizes income for the received staking reward and assigns proper cost basis to that amount of ETH.
You won't need to classify the 2 ETH sent from MetaMask to your Coinbase Wallet as generic deposit transaction types are already treated as non-taxable self-wallet transfers by default.
Other transactions that may need manual classification
Similar to our example above, some other common transactions in which CoinLedger may not be able to auto-classify your data (you will need to do so manually) include:
payments made from your wallet to a person or vendor
gifts of crypto sent
complex defi transactions
Note - not properly classifying your transactions can lead to missing cost basis transactions.
How to classify your transactions
You can classify any of your transactions within the 'Review' step of CoinLedger.
You can either classify transactions one-by-one, or through bulk action.
Classifying a single transaction
To classify a single transaction, simply click the three-dot action button on the transaction row, and select "Change classification".
Bulk Classifying Multiple Transactions
To bulk classify multiple transactions, use the filters on the right hand side of the screen to sort by similar types of transactions you wish to classify (e.g. all deposits to my Ledger wallet).
Use the 'select-all' selector, and choose the classification type you wish to bulk classify your transactions as.
*Note - bulk-selecting transactions that aren't all either inflows or outflows will limit which transaction types you can classify the transactions as.
For example, if you select both a deposit and withdrawal, you will not be able to bulk classify them as an airdrop.