If you are wondering what information Coinbase provides the Internal Revenue Service (IRS), you are in the right place.
Keep reading the most up-to-date information.
It’s tax time and you are wondering what Coinbase has reported to the IRS.
The simplest answer is:
If Coinbase has sent you a tax form (such as a 1099-MISC), that form has also been sent to the IRS.
Here is what the 1099-MISC looks like, just so you can be certain:
The current rule is that Coinbase will only report income from earned interest or crypto rewards to the IRS for US taxpayers who have earned more than $600 in a taxable year.
Since 2021, Coinbase has used a 1099-MISC form to report earnings to the IRS. So only miscellaneous income is reported to the IRS by Coinbase, not gains or losses from the sale of crypto assets.
Before 2021, Coinbase would report to the IRS using a 1099-K for the amount of crypto sold in a transaction.
This reporting caused issues for the taxpayer since the sale amount did not account for the cost basis of the asset sold.
Instead of reporting to the IRS, Coinbase now provides you with transaction reports which show gains and losses based on an accounting method called “highest-in, first-out”(or HIFO) — meaning your highest-cost assets are sold first.
This may or may not be the method that provides the least amount of tax obligation for you if you have multiple transactions in a taxable year.
Don’t make the mistake of not reporting your crypto earnings just because you didn’t receive a tax form from Coinbase.
You are responsible for reporting your earnings regardless of Coinbase reporting to you or the IRS.
Coinbase allows you to download the forms it has sent to the IRS by logging on to your account so not receiving them is no excuse.
Be aware that as cryptocurrency has become popular, the IRS has become more aware and increased their crypto tax audits, and there are dozens of news stories like the Bloomberg article below documenting this new aggressive stance from the IRS on crypto gains.
The 1099-MISC form sent by Coinbase to the IRS alerts the agency of taxpayers that are active in crypto, so not reporting gains and losses on trades could signal an audit.
"You’re playing with fire if you don’t report it."
David Canedo, a CPA and tax specialist product manager at Accointing
Tax calculation is rarely simple, so good record-keeping is essential. There are many tools available to help determine your tax obligations and even create the forms needed. Here is a page to help with how to calculate cryptocurrency taxes using Coinbase.