What is a First Inflow Missing Basis Warning?
First Inflow Missing Basis warnings occur when CoinLedger detects that you have deposited or transferred crypto into your wallet, but you haven't shown the software how you originally purchased or otherwise acquired the asset. When the original acquisition for the asset has not been imported, there is no way for CoinLedger to calculate what your cost basis is for that asset.
The purpose of the first inflow warning is to provide more context around the first detected "inflow" of an asset if it is missing cost basis.
What Causes a First Inflow Missing Basis Warning?
If your first imported transaction for an asset is a Deposit or Uncategorized transaction, it will be flagged for missing basis.
Let's run through an example to better illustrate how First Inflow Missing Basis Warnings occur:
You buy 10,000 MIM tokens on a centralized exchange: Kucoin
You then send 2,294.10 MIM tokens to your self-custodied Arbitrum wallet
You import only your self-custodied Arbitrum wallet to CoinLedger—you do not import from Kucoin
In this case, you haven't imported the original BUY transaction of your MIM tokens, and thus, CoinLedger does not know how much it cost you to originally acquire those MIM tokens. CoinLedger does not know your cost basis.
When you import your Arbitrum wallet, the deposits of MIM tokens from Kucoin will be flagged with First Inflow Missing Basis Warnings (pictured below).
In the picture below, the first detected transaction for MIM is an inflow—a Deposit. However, there are no other prior BUY, TRADE, or INCOME transactions to set the cost basis for these tokens and to show how the MIM was originally acquired.
This is further reflected by the fact that the Balance column is blank for all the Deposit transactions for MIM.
How Do I Fix a First Inflow Missing Basis Warning?
There are two ways to show CoinLedger how the asset was originally acquired:
Editing a Transaction to Resolve the First Inflow Warning
There are some scenarios when CoinLedger does not automatically classify crypto income from staking rewards, airdrops, and other complex DeFi transactions. These transactions get imported as a Deposit or Uncategorized transactions which need to be classified further in order to properly assign cost basis.
You can edit the Deposit or Uncategorized transaction flagged for the First Inflow warning directly in-app. Further details are explained here in our Uncategorized transactions guide.
The following list outlines different transactions types which require further classification:
Gifts received from friends
DeFi transactions from a unsupported smart contracts and dApps
Changing the classification to crypto income
If the flagged Deposit transaction represents crypto income acquired from staking rewards, interest, mining, airdrop, or referral commissions, or other earned income you can change the classification to assign cost basis. Likewise, if you received the asset as a gift from a friend, the Deposit transaction can be classified as a Gift and this will properly assign cost basis.
Changing the classification to a Fiat Buy
In some cases exchanges do not export complete data for fiat buys (purchasing crypto with fiat currency) so the transaction gets imported as a Deposit into CoinLedger. To resolve this, you can edit the Deposit transaction to include the fiat amount. Learn more about editing Fiat Buys.
Changing the classification to a Trade
If you transacted with DeFi protocols that CoinLedger does not yet natively support, some trade transaction types will need to be classified further in order to be included in report calculations. For tax purposes, Trades include all scenarios where you swapped one or more crypto tokens for another digital asset.
Trade - swapping one crypto asset for another crypto asset
Composite Swap - a trade where there are multiple crypto tokens on one or both sides of the trade
NFT Mint - swapping crypto for an NFT
Adding/Removing Liquidity - swapping crypto for an LP token or vice versa
Importing Additional Data to Resolve the First Inflow Warning
CoinLedger needs access to all your historical data in order to calculate your gains and losses. The software cannot generate accurate calculations based on inaccurate or incomplete data. Follow these steps to review your imported data and ensure that all original fiat buys, trades, and crypto income transactions have been imported completely into CoinLedger.
Confirm that you imported historical data for ALL exchanges, wallets, and platforms that you used to buy, sell, trade, and earn crypto income
Confirm that you imported for ALL of the years that you transacted with crypto
Review all exchanges, wallets, and platforms that you used to purchase the asset with fiat currency
Review all exchanges, wallets, and platforms where you received the asset as crypto income
Review all exchanges, wallets, and platforms where you acquired the asset by trading for it
Adding a new import source
To import from an additional account go to Step 1. Import, select the platform, and follow the step-by-step instructions.
Adding transactions manually
If you transacted on an exchange or blockchain that we do not currently support you can import the data using our Universal Manual Import Template or you can add single transactions in-app.
Can You Run a Tax Report with a First Inflow Missing Basis Warning?
CoinLedger will still run your tax report in spite of missing cost basis data. In many circumstances, First Inflow Missing Basis warnings will not have any significant effect on your gains and losses, particularly if you are simply holding the asset and do not sell or trade it away. This is because there is no gain or loss to report until you dispose of the asset by selling or trading it away.
However, if you later dispose of the asset without entering the original acquisition, it's possible that your report could be impacted. Our platform treats missing data with a zero cost basis, which is the most conservative approach but can inflate your gains if left unresolved. Learn how how missing cost basis data will effect your tax report in this article here.
Have any questions? Our support team would be happy to help :)