Wondering whether Coinbase reports to the IRS?
The question is more relevant than ever. In recent years, the IRS has sent out over 10,000 warning and action letters to Coinbase customers.
In this guide, we’ll break down everything you need to know about Coinbase tax reporting. We’ll also explain the different types of forms that Coinbase sends to customers and the IRS and what they mean for you.
How are my Coinbase transactions taxed?
In the United States, and most other countries around the world, cryptocurrency is subject to capital gains and ordinary income tax.
Capital gains: If you dispose of cryptocurrency, you’ll incur a capital gain or loss depending on how the price of your coins has fluctuated since you originally received them. Examples of disposals include selling your cryptocurrency or trading it for other cryptocurrencies.
Ordinary income: If you’ve earned cryptocurrency income, you’ll recognize income based on the fair market value of your coins at the time you received them. Examples of income events include earning staking or referral rewards.
The tax rate that you pay on your cryptocurrency varies based on multiple factors, such as your holding period and your personal income bracket.
For more information, check out our complete guide to cryptocurrency taxes.
Does Coinbase report to the IRS?
Currently, Coinbase may issue 1099 forms to both you (the account owner) and the IRS if you meet certain qualifying factors. These forms detail your taxable income from cryptocurrency transactions.
In the past, Coinbase has shared customer information to the IRS after being served a John Doe Summons. In 2016, Coinbase was required to hand over data on over 8 million transactions.
What are 1099 forms?
1099 forms are designed to provide information to the Internal Revenue Service (IRS) about certain types of income from non-employment-related sources. Put another way, 1099 forms are designed to report income that you received that wasn’t from your employer.
In this article, we’ll focus on the following types of 1099 forms.
Form 1099-K: This form is commonly used by credit/debit card networks and other payment settlement networks. The form shows the IRS the transaction volume of processed payments.
Form 1099-MISC: This form is used to report ‘miscellaneous’ income to the IRS. Rewards from referrals and staking would fall into this ‘miscellaneous’ category.
Form 1099-B: This form is used to share information about property/security disposals made through a broker. You may be familiar with this form if you’ve used stock exchanges like Robinhood or E-Trade.
Form 1099-DA: The media recently received a version of a new 1099 form: Form 1099-DA. This form was specifically designed to report capital gains and losses from digital assets.
Currently, Coinbase issues Form 1099-MISC to customers. It’s likely that in the future, the exchange will send Form 1099-B or Form 1099-DA to customers to comply with government regulations.
Does Coinbase send a 1099-K?
Coinbase stopped issuing Form 1099-K to customers after 2020.
Because Form 1099-K shows gross transaction volume instead of total capital gains and losses, the IRS sent thousands of warning letters to Coinbase customers who accurately reported their taxes.
Coinbase stopped issuing this form to customers after 2020. For more information, check out our article on why Coinbase stopped issuing Form 1099-K.
Does Coinbase send a 1099-MISC?
Coinbase sends Form 1099-MISC — which details the amount of income you have earned from Coinbase — if you meet the following criteria:
- Are a Coinbase.com customer
- Received $600 or more in cryptocurrency from Coinbase Earn, USDC rewards, and/or staking
- Are subject to US taxes
If you meet each of these three criteria, both you and the IRS will be sent a copy of your 1099-MISC.
What should I do if I receive a Coinbase tax form?
If you receive a 1099-MISC from Coinbase, you should report this and all of your other crypto-related income on your tax return.
How to report your income may vary depending on the specifics of your situation.
Self-employed: If your cryptocurrency activities are part of a trade or business, your Coinbase income should be reported on Schedule C.
Not self-employed: If you are not self-employed, your Coinbase income can be reported as ‘Other income’ on Schedule 1.
Your Form 1099-MISC will not contain relevant tax information about disposal events subject to capital gains tax, such as selling your cryptocurrency for fiat. The burden is on you to calculate your tax liability for these transactions.
CoinLedger can help. The platform can integrate with your Coinbase account and pull in a complete record of all the trades you’ve made during the tax year. Once you’ve imported transactions from your other exchanges and wallets, you can generate a complete tax report with the click of a button.
Does Coinbase send a 1099-B?
At this time, Coinbase does not issue 1099-B forms to customers.
However, this is likely to change in the near future. The 2021 American infrastructure bill requires cryptocurrency ‘brokers’ like Coinbase to issue 1099-B forms that detail capital gains and losses to customers and the IRS.
At this time, it’s unclear when mandatory 1099-B reporting will take effect. While it was originally set to go into effect during the 2023 tax year, mandatory 1099-B reporting for crypto brokers has been delayed indefinitely.
How will Coinbase 1099-Bs impact investors like me?
Mandatory 1099-B reporting may present problems for Coinbase customers in the future.
Because cryptocurrency is so easily transferable, investors often move their coins between different wallets and exchanges. As a result, it’s difficult for exchanges to provide their customers with accurate tax reporting information.
Consider the following scenario.
In this case, David’s capital gain should be $0.
However, Coinbase has no way of knowing David’s original cost basis. As a result, it’s likely that his cost basis will be ‘n/a’.
In this case, the burden of proof will be on David to prove that he bought his Bitcoin for $10,000. Otherwise, he may be on the hook for a capital gain of $10,000.
Does Coinbase report small-time crypto traders?
Coinbase will issue Form 1099-MISC to you and the IRS only if you’ve met the minimum threshold of $600 of income during the year.
What happens if I didn’t receive a 1099 form from Coinbase?
Even if you didn’t receive a 1099 form from Coinbase, you are required to report all of your taxable income from cryptocurrency. Not reporting your income is considered tax evasion, a crime with serious consequences.
What does the IRS do with the information Coinbase provides?
In the past, the IRS has used the information from 1099 forms to send warning letters to Coinbase users. It’s reasonable to assume that discrepancies between Form 1099 and a taxpayer’s return can increase the risk of a cryptocurrency tax audit.
Does Coinbase report to the IRS if you didn’t sell?
If you did not have taxable income during the year, it’s unlikely that Coinbase will report your cryptocurrency activity to the IRS. Simply holding cryptocurrency or transferring it between wallets you own is not considered a taxable event.
Still, it’s important to note that there are some situations where you may incur a tax liability even if you don’t ‘cash out’ to fiat currency. Two examples are earning cryptocurrency interest and trading your crypto for another cryptocurrency.
When will Coinbase send a 1099 form?
If you’ve met the requirements for receiving Form 1099-MISC from Coinbase, you’ll receive it by the end of February of the following year at the latest.
How to access my Coinbase tax forms
If you’re looking for a copy of your Coinbase transactions for your own records, you can download a csv file by logging in to Coinbase on desktop, then clicking ‘Taxes’ on the left-hand side.
Next, click the ‘Statements’ tab.
Hare, you can input your preferred date range and download a record of your crypto transactions.
Alternatively, you can connect your Coinbase account to CoinLedger to automatically import your transactions and handle all of your tax reporting!
How crypto tax software can help
Cryptocurrency tax software like CoinLedger can help take the stress out of your tax season. The platform automatically connects with exchanges like Coinbase and blockchains like Ethereum to help you report your taxes in minutes!
Sign up for an account for free, import all of your historical trades and transactions, and automatically generate tax forms like 8949 with the click of a button. The whole process takes around 15 minutes!
Get started with a free preview report today.
Frequently asked questions
Let’s cap off our discussion by answering a few frequently asked questions about Coinbase taxes.
Do I pay taxes on Coinbase transactions?
Coinbase transactions may be subject to capital gains or income tax depending on the specific nature of the transaction.
How do I avoid Coinbase taxes?
There is no way to legally evade taxes on your Coinbase transactions. However, strategies like tax-loss harvesting can help you legally reduce your tax bill.
Will Coinbase send me a 1099?
Currently, Coinbase sends Form 1099-MISC to customers who are based in the United States and earned at least $600 of income on the platform.
Do all crypto exchanges report to the IRS?
It’s likely that major exchanges like Coinbase will be required to issue 1099-B forms to customers and the IRS in the near future because of the passage of the 2021 infrastructure bill.
Can the IRS see my crypto wallet?
It’s likely that the IRS is closely monitoring transactions on blockchains like Bitcoin and Ethereum. In the past, the IRS has partnered with contractors like Chainalysis to analyze the blockchain and match ‘anonymous’ wallets to known individuals.
This post is for informational purposes only and should not be construed as tax or investment advice. Please speak to your own crypto tax expert, CPA or tax attorney on how you should treat taxation of digital currencies.