Income on tax report too high

Koinly Support
1

Describe the problem:
My income far exceeds what it should (very close to double). After review, it looks like it’s counting defi transfers on uniswap and sushiswap as new mining deposits toward income

Which exchange/wallet is this regarding?
Uniswap, sushiswap, xpollinate?

How did you import data into this wallet?
API

What have you tried to fix this so far?
Nothing

2

Hi Matt,

I would need a little more info to address your question properly. We need to understand which label or tag Koinly is applying when it is recording “income” on your DEFI transfers (deposits). There are several “income” tags or labels, including Mining, Reward, Income, Loan Interest and Airdrop. It sounds as though your DEFI transfers (deposits) are being tagged as Mining deposits.

If you don’t want the deposits with one of the “income” labels or tags to be treated as Income for tax purposes, you can go into Settings and toggle off the appropriate “income” label setting. When you do this, the deposited crypto will be assigned a zero cost base and you will be charged with a capital gain when the crypto is ultimately sold or otherwise disposed of.

3

Hi Mark,

Thanks for taking the time.

OK, that makes sense then. What is the proper label to assign when using a defi transfer? I assume “swap,” but I don’t want to assume anything here. There’s no option to switch it directly in the list of transactions. I have to go into the log and edit it for that option. Don’t want to ask stupid questions, but don’t want to get audited for checking the wrong box somewhere. Again, thanks for your time.

4

The taxation of DEFI transactions can vary significantly by jurisdiction. Are you subject to US tax regulations?

It seems that your issues are primarily related to liquidity pool transactions so I thought you might find it helpful to view a YouTube video on How Liquidity Pool Taxes Are Calculated (with Koinly). The video is embedded in a Koinly article called Liquidity in/out which you can find by searching the Help section for this title (the URL is below but doesn’t work for some reason).

https://help.koinly.io/en/articles/4928698-liquidity-in-out

One thing the video points out is an issue with Koinly assigning a zero cost base to certain LP tokens on Liquidity Out transactions resulting in erroneous high profits on the transactions. This could be where your issue is arising. The video shows you how to address this issue using special Pool tags.

Hope this helps.