What It Means If You Got A 1099-K For Crypto Taxes
We’ve heard quite a bit of alarm from clients who have received a Form 1099-K. An IRS document from a crypto exchange, often with larger-than-expected numbers, is unexpected for many, but there’s no need to worry.
What is the Form 1099-K?
The Form 1099-K from Coinbase or Gemini states your cumulative crypto proceeds for the tax year. The amount on the 1099-K does not represent your total gain or loss, and you don't need to include this document on your tax return. Don't be alarmed if it's a much larger number than you'd expect, as it's merely a report of your trading volume to the IRS.
As is the case for many tax forms, if you’ve received a Form 1099-K, so has the IRS. From this, the IRS knows that you have been trading cryptocurrency and thus you will likely be expected to report crypto on your tax return.
This form is also known as a Payment Card and Third Party Network Transactions form. It’s commonly used by credit card companies and payment processors like Paypal to report payment transactions that they've processed for third parties.
This is one of many recent new approaches that the IRS is taking to make sure that people are properly reporting digital currencies on their taxes.
What action do I need to take?
The 1099-K doesn’t report individual transactions and capital gains. You still need to file your Schedule D 1040 with a 8949 to report capital gains as you would normally do with crypto. You are responsible for reporting all crypto transactions — from all exchanges.
TokenTax does the work so you don’t have to.
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