Does Coinbase Report to the IRS?
If you're trading crypto on Coinbase, will you or the IRS receive any tax documents? Read more to find out more about Coinbase's crypto tax reporting.
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Coinbase 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 Coinbase tax documents, you need to report all crypto earnings on your tax returns.
Does Coinbase report to the IRS? Yes. Currently, Coinbase sends Forms 1099-MISC to users who are U.S. traders and 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 crypto tax document: 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 1099 form signals to the IRS that a user is actively using the platform and may have crypto activity other than rewards or staking to report.
Before 2021, Coinbase sent Forms 1099-K.
What does the IRS do with Coinbase tax documents?
In recent years, the IRS has increased their crypto tax audits and enforcement. They are sending letters 6173, 6174, and 6174-A as well as even CP2000 notices. Previous years’ 1099-K and current 1099-MISC data helps the tax agency 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.
What do I need to do if I don't receive a 1099-MISC from Coinbase?
If you traded crypto or earned crypto from staking or rewards on Coinbase in the last tax year, you need to report your capital gains/losses and income, regardless of whether you received a 1099-MISC or not.
To access your transaction data on Coinbase, visit the Reports tab in your account. On Coinbase Pro, this data can be found in your Statements section.
Why did Coinbase switch from Form 1099-K to Form 1099-MISC?
Because Form 1099-K reports the aggregate amount of crypto involved in an individual’s trades, rather than the net profits or loss, it is easy for transactions that ultimately represent 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.
For more info on crypto tax basics, visit our Crypto Tax Guide.
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