Does Coinbase Report to the IRS?
If you're trading crypto on Coinbase, will you eceive a 1099? Read more to find out more about crypto tax reporting.
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Key Takeaways
Coinbase reports to the IRS. It sends Forms 1099-MISC to the IRS and U.S. traders who made more than $600 in crypto rewards or staking.
Regardless of whether you receive tax documents, you need to report all crypto earnings on your tax returns.
Coinbase reports to the IRS. Currently, it sends Forms 1099-MISC to users who are U.S. traders who made more than $600 from crypto rewards or staking in the last tax year. Note that these tax forms do not report capital gains or losses.
The exchange sends two copies of each cryptocurrency tax form: One to the taxpayer and one to the IRS. Thus, if you have received a 1099 form from Coinbase, so has the IRS—and they’ll be expecting you to file taxes on your cryptocurrency income.
The 1099-MISC tax document does not report crypto capital gains or losses, but that doesn't mean you don't need to report them. This form signals to the IRS that a user is actively trading crypto and may have transactions other than rewards or staking to report.
What does the IRS do with tax documents?
In recent years, the IRS have increased their crypto tax audits and enforcement. They are sending letters 6173, 6174, and 6174-A or even CP2000 notices. Previous years’ 1099-K and current 1099-MISC data helps the IRS identify filers who may be failing to report or under-reporting.
What do I need to do if I receive a 1099-MISC from Coinbase?
The 1099-MISC doesn’t report individual transactions from staking or rewards, just your total income from them. You are required to report the details—as well as any crypto capital gains, losses, or ordinary income from any exchange—in order to calculate your crypto taxes. A crypto tax calculator can help with this. For more information on the 1099-MISC visit our blog about cryptocurrency Form 1099s.
Why did Coinbase switch from Form 1099-K to Form 1099-MISC?
Before 2021, Coinbase sent Forms 1099-K. However, because Form 1099-K reports the aggregate amount of crypto involved in an individual’s trades, rather than the net profits or loss, it was easy for transactions that ultimately represented a loss to be interpreted as generating revenue.
For example, imagine you purchased a token for $1.00, but sold it later in the same year for only 75 cents. Despite the fact that this series of transactions represented a 25 cent loss, $1.75 would be reported as part of the amount on the 1099-K.
This situation can lead to confusion at the IRS. Agents sometimes interpret 1099-K calculations as crypto traders’ profits, rather than their trades’ volume. This may result in the IRS sending CP2000 letters, which inform filers they may have significantly under-reported their income on their tax filings. To address such misunderstandings usually requires the intervention of a crypto CPA.
Although IRS misinterpretations of the 1099-K are typically resolved, their effect on customers was burdensome enough to prompt Coinbase and some other crypto exchanges to stop sending these tax forms.
Accessing your Coinbase tax documents
Even if you don't receive a 1099-MISC from Coinbase, you need to report any income or capital gains/losses you've realized on the exchange. Many crypto tax calculators, TokenTax included, can sync to Coinbase via API so that transaction history is automatically imported and updated.
However, if you need to download a copy of your transaction history for record-keeping or your accountant, you can do so by visiting the Taxes section of your account. Here you can download gain/loss reports and raw transaction history CSVs. You can also see if Coinbase has issued any forms about you to the IRS.
For more info on crypto tax basics, visit our Crypto Tax Guide.
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