Learn everything you need to know about crypto tax in our Cryptocurrency Tax Guide
The answer: Yes. For some customers, Coinbase has reported information to the IRS
If you’re in the mindset that cryptocurrencies like bitcoin are tax free due to their cryptographic nature, then think again.
Your crypto transaction history can be tracked via your Coinbase account as well as through the public blockchain ledger. Thus, it’s important that you properly file your taxes for all digital asset activities.
There are two particular instances where Coinbase may have reported — or will report in the future — information on your crypto trading to the IRS.
In this article, we’ll talk about the two ways that Coinbase has reported customer information. Read below to find out what the IRS may know about you, what the IRS expects from taxpayers.
The IRS summoned Coinbase for its user trade data
In December 2016, the IRS issued a summons to Coinbase, asking for records for ~500,000 Coinbase customers regarding their personal information and virtual currency transactions. Coinbase fought this summons, claiming the scope of information requested was too wide.
After Coinbase petitioned the IRS, the order was changed to only be for a more narrow scope of information from only ~13,000 users. On February 23rd, 2018, Coinbase informed these users that they were providing information to the IRS.
Was my Coinbase information was given to the IRS?
The court ultimately ordered Coinbase to provide documents for any user with at least $20,000 of any one type of transaction: buying, selling, sending, or receiving digital currencies, in any one year between 2013 to 2015.
That means that if you bought $20k worth of crypto in 2013, 2014, or 2015, or if you received at least $20k of crypto to your Coinbase wallet in one of those years, then your information was sent to the IRS.
The information provided to the IRS is as follows:
Taxpayer ID number
Transaction logs, post-transaction balance, names of parties in the transaction
Periodic statements of accounts and invoices
If you were actively trading crypto on Coinbase between 2013 and 2015, then your information may have been provided to the IRS. Even if you were just trading smaller amounts of crypto at a time, your total transaction value could have exceeded the $20k threshold across your total transactions volume during the year.
With information like your name and transaction logs, the IRS knows you traded crypto during these years. As a result, many have used our full filing service to amend their prior tax years to include cryptocurrency — particularly 2013, 2014, and 2015.
Will the IRS get any information about me if I only started trading on Coinbase after 2015?
While the IRS summons only covers customers who traded from 2013 to 2015, Coinbase may be reporting information to the IRS about your trading activity even if you’ve only been trading recently in the 2018 and 2019 tax years. They are doing this by sending Form 1099-Ks.
Recently, many Coinbase users have received an IRS Form 1099-K. According to Coinbase, if you had at least 200 orders during the tax year, with the total value of those orders equal or greater than $20,000k, then you would have received a 1099-K. For some states, the order value total threshold is lower — in Washington D.C. for example, the threshold is only $600.
As it the case for tax forms in general, if you receive a 1099-K, then the IRS receives a copy of the same form. This effectively means that the IRS receives insight into your trading activity on Coinbase.
If you have more questions, be sure to read our detailed article about the 1099-K.
What is the IRS doing with this information from Coinbase?
In the summer of 2019, the IRS began to greatly increase their presence among cryptocurrency. They began to send our letters 6173, 6174, and 6174-A as well as even CP2000 notices.
Coinbase’s IRS reporting is likely how the IRS knows who to send these letters to.
How do I properly file taxes to the IRS?
Coinbase does have a built in tax calculator on their website, but it only works if you only acquired, traded, and held crypto on Coinbase and/or Coinbase Pro. If you transferred in crypto from other sources, like another exchange, then Coinbase won’t be able to produce a cost basis for that crypto when you sell it.
If you properly file your crypto taxes for each tax year that you’ve traded cryptocurrency, then you will be compliant with the IRS.
People are using crypto tax software which imports their transaction data from all exchanges, calculates their gain or loss, and produces accurate crypto tax forms to be filed with tax return.
Ultimately, you need to file your crypto taxes, whether you’ve used Coinbase or not. You need to report income as well as capital gains and losses for crypto.
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