How am I supposed to know if I am in profit or a loss if I have been trading across multiple exchanges? For example, if I bought $1,000 in Bitcoin on Coinbase, transferred it over to multiple exchanges, and purchased other coins with that $1,000. Is it as simple as downloading the tax reports from the exchanges?
If the country you live in have a regulated environment for cryptocurrencies and the law is explicit about the tax on your crypto profits, then it should be easy enough to calculate it. You need calculate the difference between Deposit and Withdrawals from/to your bank account and Coinbase, then apply the tax percentage to that and you should be fine.
For your example: If you buy Bitcoin with $1000 (0.12 BTC) then you trade here and there and make 1 BTC, and after 2 months you decide to withdraw $1500 (0.2 BTC) from Coinbase to your account, then you must pay tax on $500 to your local authorities. If you keep the remaining 0.8 BTC on your personal bitcoin wallet you don't have to pay any tax on it. Is more like you deposit $200 to an online casino and win $600, but you don't withdraw anything from the casino, you don't pay taxes for your winning unless you decide to withdraw the money.
Note:
- this is the procedure in my country.
- I use Kraken for depsits and withdrawals.