Does Coinbase Report to the IRS?

Does Coinbase report to the IRS? This has become a popular question recently, and the IRS has made it clear that cryptocurrency tax enforcement is a high priority. We’ll break down the key points you need to know about Coinbase tax reporting, as well as explain the different types of forms that Coinbase sends to customers and what they mean for you.

How Are My Transactions Taxed?

Cryptocurrency is treated as property for tax purposes; this means that capital gains and losses reporting rules apply to cryptocurrency, similar to how they apply to stocks.

If you dispose of cryptocurrency, you’ll incur a capital gain or loss depending on how the price of your coins has fluctuated since you originally received them. Some examples include selling or trading it for other cryptocurrencies.

If you’ve earned cryptocurrency income, you’ll recognize income based on the fair market value of your coins at the time you received them. Some examples include earning staking or referral rewards.

Your holding period and your personal income bracket are factors that contribute to the tax rate you pay on your cryptocurrency.

Does Coinbase Report to the IRS?

Coinbase may issue a certain 1099 form to both you and the IRS if you meet certain qualifying factors. In the near future, Coinbase and other major exchanges will likely be required to issue 1099 forms to all customers due to the passage of the American infrastructure bill.

In previous years, the IRS used the information from the 1099 forms to send out warning letters. Any discrepancies between Form 1099 and a taxpayer’s return can increase the risk of a cryptocurrency tax audit.

What are 1099 forms?

1099 forms are designed to provide information about certain types of income from non-employment-related sources to the IRS. There are many types of 1099 forms, however for the purpose of this article, we’ll focus on the three relevant ones.

  • Form 1099-B: This is used to share information about property/security disposals made through a broker. If you have used stock exchanges like Robinhood or E-Trade you may already be familiar with this form.
  • Form 1099-K: This is commonly used by credit/debit card networks and other payment settlement networks, and shows the IRS the transaction volume of processed payments.
  • Form 1099-MISC: This is used to report ‘miscellaneous’ income to the IRS, such as rewards from referrals and staking.

Does Coinbase Send a 1099-K?

Before 2021, Coinbase would send a 1099-K tax form if:

  1. You were a Coinbase Pro or Coinbase Prime customer
  2. You executed 200 trades or more, with a total value equal to or greater than $20,000, or if you met your state’s 1099-K reporting thresholds.
  3. You were subject to US taxes

If you met all three of these requirements, Coinbase would send you and the IRS a copy of 1099-K. However, Coinbase stopped issuing this form to customers after 2020.

Does Coinbase Send a 1099-MISC?

You will receive Form 1099-MISC if you:

  1. Are a Coinbase.com customer
  2. Received $600 or more in cryptocurrency from Coinbase Earn, USDC rewards, and/or staking
  3. Are subject to US taxes

If you meet all three of these requirements, both you and the IRS will get a copy of your 1099-MISC.

What Should I do if I Receive a Tax Form from Coinbase?

If you are self-employed and your cryptocurrency activities are part of a trade or business, your Coinbase income should be reported on Schedule C.

If you are not self-employed, your Coinbase income can be reported as ‘Other income’ on Schedule 1.

Your Form 1099-MISC will not contain relevant tax information about disposal events, and the burden falls on you to calculate your tax liability for these transactions.

Does Coinbase Send a 1099-B?

No, currently Coinbase does not issue 1099-B forms to customers. However, this will most likely change in the near future. The 2021 American infrastructure bill requires cryptocurrency ‘brokers’ to provide 1099-B forms to customers and the IRS starting in 2024.

How Will Coinbase 1099-Bs Impact Investors?

Since cryptocurrency is so easily transferable, investors often move their coins between different wallets and exchanges. This makes it difficult for exchanges to provide their customers with accurate tax reporting information, which may present problems for Coinbase customers in the future.

Contact us today if you have any questions regarding your cryptocurrency tax reporting!