Exchange Cost Basis Deposit: Kryptos

Your Exchange Is Asking for Cost Basis After a Deposit: Here's What to Do

If you've received an email from Coinbase, Kraken, Gemini, or another US crypto exchange asking for cost basis information after you deposited crypto from a personal wallet or another exchange, you're not alone.This is happening to crypto investors across the US, and it's causing a lot of confusion.

Here's what's actually happening, what these terms mean, and exactly what you need to do.

Why Are US Exchanges Asking for Cost Basis on Deposits?

Starting in 2025, the IRS implemented new broker reporting requirements for cryptocurrency exchanges operating in the United States. Under these rules, US-based exchanges like Coinbase, Kraken, Gemini, Binance.US, and Bit stamp must report your crypto transactions and cost basis to the IRS on Form 1099-DA, similar to how stock brokers report stock sales on Form 1099-B.

Here's the key issue: When you deposit crypto to anexchange from an external wallet or another platform, the exchange has no ideawhat you originally paid for that crypto. They only see the incoming deposit.

Example: You bought 1 BTC on Binance.US in 2022 for$20,000. In 2025, you transfer it to Kraken. Kraken sees the deposit but doesn't know you paid $20,000 for it. They need this information to reportaccurately when you sell.

Without your original cost basis, exchanges are required to report the cost basis as zero to the IRS. This could mean you owe taxes on the entire sale price instead of just your actual gains.

When Do Exchanges Ask for Cost Basis?

Exchanges request cost basis information specifically when:

• You deposit crypto from a personal wallet (hardwarewallet, MetaMask, Trust Wallet, etc.)‍
• You transfer crypto from another exchange (fromBinance.US to Coinbase, from Kraken to Gemini, etc.)‍
• You receive crypto from a DeFi protocol to yourexchange wallet

They do NOT ask for cost basis on crypto you purchaseddirectly on their platform because they already have that information.

What Is Cost Basis?

Your cost basis is the original value of an asset for tax purposes. In crypto, it's what you paid to acquire a coin or token, includingany fees.

Example: You bought 1 ETH on Binance.US for $2,000plus a $10 fee. Your cost basis is $2,010.

Later, you transfer that ETH to Coinbase. When you sell it on Coinbase for $3,000, your capital gain is $990 ($3,000 minus $2,010).

The IRS needs to know your cost basis to determine if you owe capital gains tax on your crypto sales.

What Are Tax Lots?

Tax lots identify which specific units of cryptocurrency you're depositing when you have multiple purchases at different prices.

Example: You bought ETH three times on different platforms:

• January 2023: 1 ETH at $2,000 on Kraken
• March 2024: 1 ETH at $2,500 on Binance.US
• June 2024: 1 ETH at $3,000 on Coinbase

In September 2025, you transfer 2 ETH from your hardware wallet to Gemini. Which ETH did you deposit? The answer affects your tax bill when you eventually sell.

Tax lot accounting methods include:

• ‍FIFO (First In, First Out): You deposited the January and March ETH‍
• LIFO (Last In, First Out): You deposited the June and March ETH‍
• HIFO (Highest In, First Out): You deposited the June and March ETH (highest cost basis)

Specific Identification: You specify exactly which ETH you deposited

What Is Form 1099-DA?

Form 1099-DA is the new IRS form that crypto exchanges like Coinbase, Kraken, and Gemini will use to report your digital asset sales, starting with the 2025 tax year. It's the crypto equivalent of Form 1099-B for stocks.

The form will show:

• Your crypto sales during the year
• Cost basis for each sale
• Gross proceeds
• Capital gains or losses

You'll receive this form in early 2026 for your 2025 transactions.

What Happens If You Don't Provide Cost Basis for Deposits?

If you don't provide cost basis data for crypto you deposited, the exchange is required to report your cost basis as zero to the IRS. This means the IRS will assume your entire sale proceeds are taxable gains.

Example: You deposit $10,000 worth of Bitcoin to Kraken that you originally bought for $8,000 on Coinbase.

When you sell on Kraken:

• ‍With correct cost basis: You owe taxes on $2,000gain‍
• Without cost basis: The IRS thinks you owe taxeson $10,000 gain (5x more!)

You can correct this on your tax return, but it creates extra work and potential audit risk.

How to Respond When Your Exchange Asks for Cost Basis on Deposits

Step 1: Identify the Original Purchase

Determine where and when you originally acquired the crypto you deposited:

• Which exchange or platform did you buy it on?
• What date did you purchase it?
• What price did you pay (in USD)?
• What fees did you pay?

Step 2: Gather Transaction Records

Collect documentation from the original source:

• Transaction history from the original exchange (Coinbase, Kraken, Binance.US, etc.)
• Wallet transaction records if you bought through a DEX
• Purchase receipts or confirmations
• Blockchain transaction hashes

Step 3: Calculate Your Cost Basis

For the crypto you deposited, calculate:

• Original purchase price in USD
• Date of acquisition
• Transaction fees from the original purchase
• Total cost basis (purchase price + fees)

Important: Use the cost basis from when you ORIGINALLY BOUGHT the crypto, not the value when you transferred it to the exchange. Transfers between wallets don't create taxable events or change your cost basis.

Common Deposit Scenarios and How to Handle Them

Scenario 1: Transferred from Another Exchange

Situation: You bought BTC on Binance.US and transferred it to Coinbase.

What to provide: Original purchase date and price from Binance.US, not the value when you transferred it.

Scenario 2: Deposited from Hardware Wallet

Situation: You stored ETH in your Ledger wallet for years and now deposited to Kraken.

What to provide: Go back through your records to find when and where you originally bought the ETH (could be from Coinbase, Gemini, or another exchange years ago).

Scenario 3: Multiple Purchases Consolidated

Situation: You bought BTC on three different occasions on different platforms, sent it all to your hardware wallet, and now deposited 2 BTC to Gemini.

What to provide: List each original purchase with dates and prices. Use a tax lot accounting method to identify which specific BTC you deposited.

Scenario 4: DeFi Protocol to Exchange

Situation: You earned tokens through staking on a DeFi protocol and deposited them to an exchange.

What to provide: The fair market value when you received the tokens (this becomes your cost basis). Include the date youreceived them.

Key Deadlines to Know

• ‍Now: US exchanges are requesting cost basis information when you make deposits‍
• Throughout 2025: Exchanges will continue requesting cost basis for all incoming deposits‍
• January 31, 2026: You'll receive Form 1099-DAfor 2025 transactions‍
• April 15, 2026: Tax filing deadline for 2025 tax year

Common Mistakes to Avoid

Don't ignore the request. Failing to provide cost basis means the exchange reports zero cost basis to the IRS, resulting in a massive tax bill.

Don't use the transfer value as cost basis. Your cost basis is what you ORIGINALLY paid, not the value when you transferred it to the exchange.

Don't guess randomly. Use actual transaction records or conservative estimates based on documented market data from the purchase date.

Don't forget about fees. Your cost basis includes both the purchase price and any fees paid.

Frequently Asked Questions

Coinbase is asking for cost basis on my deposit - do I have to provide it?

Yes, you should provide it. If you don't, Coinbase willreport your cost basis as $0 to the IRS. This means when you sell, the IRS willthink your entire sale amount is profit, and you'll owe way more in taxes thanyou actually should.

I just transferred Bitcoin from my hardware wallet to Kraken and they wantcost basis info - why?

Kraken has no idea what you originally paid for that Bitcoin. They only see it appearing in your account. To report your taxes correctly to the IRS on Form 1099-DA, they need to know your original purchase price. Otherwise, they're required to report $0 cost basis.

What happens if I ignore Coinbase's cost basis request after depositing crypto?

Coinbase will report your cost basis as zero to the IRS.When you eventually sell, the IRS will assume 100% of your sale proceeds are taxable gains instead of just your actual profit. You can fix this on your taxreturn, but it's a headache and increases audit risk.

I moved ETH from Binance.US to Gemini - what cost basis do I give them?

Give Gemini the original cost basis from when you firstbought the ETH on Binance.US. Don't use the value at the time you transfer edit - transfers don't change your cost basis. If you bought that ETH for $2,000back in 2022, that's still your cost basis in 2025.

Can Kryptos help me deal with these annoying cost basis requests every timeI deposit?

Yes, that's exactly what Kryptos does. It tracks your costbasis automatically across all exchanges and wallets. When Coinbase, Kraken, or Gemini asks for cost basis after a deposit, you can pull the exact info from Kryptos and upload it. No more digging through old exchange accounts.

Is this cost basis request thing new? I've been transferring crypto foryears and never had to do this.

Yes, it's new for 2025. The IRS implemented new broker reporting requirements that force exchanges to collect and report cost basis information. Before this, exchanges didn't have to ask, but now it's mandatory.

The Bottom Line

Exchanges like Coinbase, Kraken, and Gemini asking for cost basis on deposits is the new reality for US crypto investors who move assets between platforms. It's part of the IRS bringing crypto taxation in line with traditional securities.

The good news: providing accurate cost basis now means correct tax reporting later and avoids the nightmare of the IRS assuming zerocost basis (100% taxable gains).

The key is maintaining good records of where and when you originally bought your crypto, especially if you plan to move it between wallets and exchanges. Whether you track this manually or use automated tools like Kryptos, having accurate cost basis data ready will save you time, money, and stress.

About the author

Payam Masood

Head of Content and Social Media - Kryptos