Does Coinbase Report to the IRS? Yes, and You Should Too
Come tax time, crypto traders will be on the hook for capital gains and income taxes. In many cases, Coinbase reports user information to the IRS. You should too.
During his first year in office, President Biden sought to increase crypto tax enforcement and commit billions to recover back taxes. As Americans file their 2021 taxes, the IRS will focus heavily on crypto gains and income. Coinbase reports crypto earnings for most users to the IRS—and you should, too.
Here’s what to know about crypto tax reporting in the U.S. and what information Coinbase reports to the IRS for tax purposes.
The IRS puts capital gains and income taxes on crypto.
Because the U.S. treats crypto as property, people who trade cryptocurrency in the U.S. and receive profit from the transactions face capital gains taxes.
Crypto losses can offset those gains by up to $3,000. The total amount owed depends on the cryptocurrency tax accounting method a trader uses, like first-in-first-out (FIFO) or last-in-first-out (LIFO). Whatever the method, the U.S. is bent on eliminating tax evasion—especially in the loosely regulated crypto asset class.
Traders can reconcile crypto taxes on IRS Form 8949, Sales and other Dispositions of Capital Assets.
The IRS taxes crypto earnings as income in the case of staking and rewards.
Coinbase reports certain activity to the IRS.
Coinbase users who make at least $600 in activities like rewards or fees from Coinbase Earn, USDC Rewards, and staking receive an IRS form 1099-MISC at the start of the tax filing season. There are two copies of the form—one that goes to the user, and one that goes to the IRS. This form tells the IRS that the user earned income from cryptocurrency during the specified tax year. It also tells the total income earned from these activities, although it doesn’t spell out the individual transactions.
Does Coinbase report your transactions to the IRS?
The Forms 1099-MISC that Coinbase sends report users who earned income from crypto to the IRS. However, it doesn’t specify gains and losses through specific transactions. That’s up to the individual user to report. When Coinbase reports to the IRS, it highlights who earned money through certain crypto activities that generate income. Coinbase gives the IRS the go-ahead to audit the user if necessary after tax season is over. Ultimately, it provides a pathway to investigate traders and miners who might be under-reporting or failing to report their crypto earnings.
Coinbase users can use CoinTracker to calculate taxes.
In January, Coinbase partnered with CoinTracker to provide certain users with more detailed accounting information about their gains and losses. Any user who sends and receives crypto from Coinbase Pro or external cryptocurrency wallets can access a CoinTracker report for up to 3,000 transactions.
Coinbase users are also eligible for $20 off TurboTax filing software. According to TurboTax, the platform “allows cryptocurrency users to report their cryptocurrency taxes directly within the TurboTax app. To enable this functionality, the TurboTax team has partnered with CryptoTrader.”