Make no mistake, taxes are payable on crypto gains in the US. But will Coinbase report your activity to the IRS? Let's find out.
Traders can no longer be forgiven for thinking that crypto gains are tax free. Globally, and certainly here in the US, authorities have made it very clear that Capital Gains Tax and Income Tax is payable on crypto. There's no doubt that failing to meet your tax obligations will land you in hot water - be it a fine, or even jail time depending on the scale of evasion.
That's why it's incredibly important to report crypto, gains, losses and income - whether your exchanges are known to report to the IRS, or not.
Still, investors have every right to know how their trading data is being shared. Especially when it comes to their dealing with Coinbase - one the biggest cryptocurrency exchanges in the USA, and one that's a regular headline grabber when it comes to regulation.
So to answer the question - let's explore whether Coinbase in the US hands over customer trading data to the IRS, or not.
Does Coinbase report to the IRS? Yes. Coinbase reports your cryptocurrency transactions to the IRS before the start of tax filing season. As a Coinbase.com customer, you'll receive a 1099 form if you pay US taxes and earn crypto income over $600.
Coinbase began submitting 1099 forms to the IRS and to individuals users in 2017.
Yes, Coinbase issues the IRS Form 1099-MISC for rewards earned through Coinbase.com and Coinbase Pro.
For every U.S. crypto trader that makes more than $600 in the previous financial year, Coinbase will send two copies of Form 1099-MISC to the IRS; one to the taxpayer and one to the IRS!
109-MISC forms are used to report any and all miscellaneous income that does not come from an employer, including crypto income. You can find out more about 1099-MISC forms here.
You may receive a 1099-MISC from Coinbase if:
If you're going to receive a 1099-MISC form from Coinbase, you'll receive it by the end of February of the following financial year at the latest.
You can download your 1099 by going to documents, in your Coinbase tax center.
No. Only selected US customers may receive a 1099-MISC form from Coinbase if they meet certain criteria. International customers - as in - not US residents, will not receive a Form 1099.
Even if you don’t receive a 1099 Form from Coinbase, you are still required to report all cryptocurrency transactions to the IRS every tax season - and they might know about your Coinbase investments anyway. Back in 2016, the IRS won a John Doe Summons case against Coinbase, forcing them to share customers' KYC data. In this instance, the IRS asked for records on individuals engaging in transactions of $20,000 or more in a financial year, and more than 10,000 Coinbase customers were contacted warning them they had failed to report additional income or gains.
The US financial year runs from 1 January to 31 December, Coinbase tax reporting happens after the end of the financial year and before the filing deadline on April 15.
Coinbase 1099 forms only describe any income (rewards) an investor has made, and only those generated through the Coinbase platform, so it won't include any capital gains or losses you've made on Coinbase. For traders who use multiple exchanges, a 1099 from Coinbase is not enough to report crypto taxes accurately.
Coinbase will only issue 1099 forms to select customers - and this will only describe Coinbase activity. For everyone else, traders with multiple exchange accounts, and international customers, you'll need to download your Coinbase transaction history to fulfill your tax filing obligations, or connect to crypto tax software via API and have your transaction history returned automatically.
You can download your Coinbase transaction history by going to reports (in the drop-down menu from your profile icon) and then selecting generate report. For Coinbase Pro, go to statements (in the drop-down menu under your profile icon) and select generate.
Alternatively, you can connect Coinbase to Koinly via API in minutes to automatically fetch your transaction history.
Coinbase stopped issuing 1099-K forms back in 2020. Formerly, the exchange issued a 1099-K if an investor had 200 or more transactions on a platform, valued over $20,000 in a single financial year. The issue with 1099-K forms was that these forms report gross proceeds - not gains and losses, causing a lot of confusion for both investors and the IRS.
No. Coinbase does not issue Form 1099-Bs. Find out which exchanges issue 1099-B Forms.
No, it's unlikely Coinbase report to the IRS if you don't sell, swap, spend, or earn any crypto on the exchange. If you've held crypto throughout the financial year but made no disposals or income, the IRS will not be interested in your crypto investment activities.
Coinbase customers may receive an IRS B-Notice if there are any discrepancies with your tax identification number (TIN) and legal name used by Coinbase to file Forms 1099 with the IRS. The B-Notice will:
To correct your TIN and/or name, customers will need to contact Coinbase Support. For more information about the IRS B-Notice, please go here.
The IRS has made it very clear all crypto investments must be reported, and will inevitably be increasing audits as in 2022, the office received a huge budget increase in order to tackle tax evasion, with crypto being singled out as a key focus. Find out more about the penalties for crypto tax evasion.
Yes. Koinly is a Coinbase tax calculator. Not only can Koinly import your Coinbase transaction history directly from Coinbase itself, but Koinly can also calculate your Coinbase taxes in a format that makes sense for the IRS.
As a Coinbase tax software, Koinly is able to do a bunch of impressive tasks that save you time and can even save you from paying too much taxes.