It’s now established that virtual currencies have acquired mainstream status since you both users and companies use them to exchange goods and services. Although still relatively new, cryptocurrency now counts toward your assets, and the transactions you make with them (at least, in the US) incur taxes.
If you perform most of your crypto activity on Coinbase, you must be wondering whether any of your transactions are reported to the IRS and whether you need to file a return for the taxes you’ve incurred. In this post, we’ll help you understand what taxes you owe when receiving or selling crypto, what Coinbase reports to the IRS, and how to access all of your crypto activity from Coinbase.
Do you owe crypto taxes?
The IRS treats any virtual (crypto) currency as a property for Federal income tax purposes and in many ways, it’s viewed in the same aspect as that of stocks, capital assets, and bonds. Depending on the money you’ve gained from crypto, you will be charged tax in two ways – income and capital gains.
When crypto is taxed as income, you will have to pay a federal tax on the total money you’ve earned over the course of a year. When your crypto is taxed as capital gains, it will be charged on the account you’ve gained as profits from selling various assets.
You will owe crypto taxes only for transactions that qualify as taxable events like when selling your crypto for cash, converting it to another cryptocurrency, or exchanging it for goods and services. You won’t need to report your gains if you still hold the original shares. We’ll talk more about what qualifies as a taxable event in a section later in this post.
Does Coinbase report to the IRS?
Yes, but for those accounts that are eligible as per IRS’ Forms 1099-MISC. Coinbase will only send you Form 1099-MISC if:
- You’re a crypto trader in the US.
- You accounted to $600 or more from rewards, profile, or staking crypto in the past tax year.
When you fulfill the above conditions, Coinbase, like other exchanges, will generate two copies of your crypto tax report – one that will be sent to you and another to the IRS. This means, if you have received Form 1099-MISC from Coinbase, the IRS has almost certainly received the same. In that case, you must furnish your crypto income and file taxes on it.
Now that we’ve established that Coinbase sends Form 1099-MISC to both you and the IRS, you may wonder what information is actually shared on this form. Coinbase will only report miscellaneous income” to the IRS but not your overall gains or losses. However, this doesn’t mean that you don’t need to report your capital gains or losses.
By receiving Form 1099-MISC from Coinbase, IRS will be notified that you are actively using the crypto exchange and have made transactions other than staking and rewards that you need to report to the tax agency. When this form is sent to you and the IRS, Coinbase will only report your total income from transactions you’ve made over the past tax year. Besides your total income, Coinbase itself won’t report your individual transactions to the IRS.
Your total income will be compiled from all of your taxable transactions including:
- Selling your crypto for dollars
- Spending crypto on goods and services
- Converting your crypto into another crypto
- Mining crypto as business
- Receiving crypto as paycheck
- Getting crypto when selling goods and services
- Receiving staking rewards and incentives in crypto
- Getting returns from when you hold a crypto
- Receiving free crypto from a company as part of giveaway
Will Coinbase send you any tax forms?
As we explained above, Coinbase will send you Form 1099-MISC showing a total income from all of your transactions. This form will be sent to you if your total income from Coinbase amounts to $600 or more and the same form will be sent to the IRS to signal them that you are actively using Coinbase to make crypto transactions.
If you don’t receive a Form 1099-MISC from Coinbase but you still earned rewards or staking in the platform and are well within the $600 limit, you’re still required to report your crypto income when filing your tax return.
While Coinbase only sends Form 1099-MISC to its users, you may receive other forms that may need to be submitted to the IRS if you make transactions on other crypto exchanges.
Although Coinbase doesn’t report you individual transactions, it provides you a way to look at every transaction that you have done on its exchange platform that may have resulted in capital gains or losses. These transactions can be anything from selling crypto, spending it, or converting it to another cryptocurrency. The company has acknowledged that your gains or losses from the 2021 tax year won’t be reported to the IRS.
When does Coinbase not report to the IRS?
Coinbase reports your total income from crypto to the IRS when sending them and this total income includes all of your taxable transactions we listed above. Although these transactions are not reported individually, you still need to furnish details that explain your total income. Besides these ones, there are some transactions that won’t show up inside your total income and thus, won’t be reported to the IRS. These transactions are called non-taxable events and include:
- Purchasing crypto with cash and holding it: When you don’t sell crypto, the gains you get from it are unrealized and are thus not taxed until you sell them.
- Moving crypto from one wallet to another doesn’t make it taxable unless you sell.
- Gifting someone crypto up to $15,000 per recipient without any exchange of items doesn’t yield as a taxable event.
- Donating crypto to a non-profit or a 501(c)(3) charity won’t be taxable.
- Receiving crypto as a gift yourself from someone doesn’t count as taxable income until you sell it or use it in staking.
In all the above scenarios, Coinbase won’t include such transactions toward your total income as part of its report to the IRS.
Can you access the transaction history and tax report on Coinbase?
In order to let you submit a complete summary of your crypto transactions, Coinbase offers you a Coinbase Taxes portal where you can view all of your crypto activity on Coinbase.com, learn which transactions are taxable, know your total income, and understand your capital gains and losses. This portal also hosts forms that you may need to submit to the IRS to file your crypto returns.
Coinbase users can access their transaction history by checking out the Reports section inside Coinbase.com and downloading their tax report by going to the Documents section inside Coinbase Taxes.
Coinbase Pro users will need to go to the Statements section inside their account to access their transaction history and tax report.
That’s all you need to know whether Coinbase reports your crypto to the IRS.
