How are my Coinbase transactions taxed?
Does Coinbase report to the IRS? Yes. Currently Coinbase IRS reporting includes forms 1099-MISC for users who are U.S. traders who made more than $600 from crypto rewards or staking in the 2022 tax year. Note that these tax forms do not report capital gains or losses.
See our article on how to report cryptocurrencies on taxes for more general information.
What information does Coinbase send to the IRS?
Coinbase and Coinbase Pro send two copies of each cryptocurrency tax form: One to the taxpayer and one to the IRS. Thus, if you have received a Coinbase 1099, so has the IRS—and they’ll expect you to file taxes on your cryptocurrency income.
Note: In 2022, Coinbase began to sunset Coinbase Pro and move those features to Coinbase Advanced under the same account.
Gain/loss report
The Coinbase 1099 tax document does not report crypto capital gains or losses, but that doesn't mean you don't need to report them. A Coinbase 1099 signals to the IRS that a user is actively trading crypto and may have transactions other than rewards or staking to report. Coinbase and Coinbase Pro do have a gain/loss report but does not report your gains or losses to the IRS.
Raw transaction report
Coinbase does not provide a raw transaction report to the IRS. That said, you can access your raw transaction report via Coinbase and Coinbase Taxes, with a range of available gain/loss reports. Raw Coinbase transaction history can be found through custom reports.
What does the IRS do with tax documents?
In recent years, the IRS has increased their crypto tax audits and enforcement. They are sending letters 6173, 6174, and 6174-A or even CP2000 notices. 2022 tax year 1099-K and 1099-MISC data help the IRS identify filers who may be failing to report or under-reporting.
What are 1099 forms?
A 1099 tax form is a record that an entity or person who is not your employer has paid or given you money. Here are three common 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.
What do I need to do if I receive a 1099-MISC from Coinbase?
The 1099-MISC doesn’t report individual transactions from staking or rewards, just your total income from them. You are required to report the details—as well as any crypto capital gains, losses, or ordinary income from any exchange—in order to calculate your crypto taxes. A crypto tax calculator can help with this. For more information on the 1099-MISC visit our post about cryptocurrency Form 1099s.
Why did Coinbase switch from Form 1099-K to Form 1099-MISC?
Before 2021, Coinbase sent Forms 1099-K. However, because Form 1099-K reports the aggregate amount of crypto involved in an individual’s trades, rather than the net profits or loss, it was easy for transactions that ultimately represented a loss to be interpreted as generating revenue.
1099-K form example
For example, imagine you purchased a token for $1.00, but sold it later in the same year for only 75 cents. Despite the fact that this series of transactions represented a 25 cent loss, $1.75 would be reported as part of the amount on the 1099-K.
This situation can lead to confusion at the IRS. Agents sometimes interpret 1099-K calculations as crypto traders’ profits, rather than their trades’ volume. This may result in the IRS sending CP2000 letters, which inform filers they may have significantly under-reported their income on their tax filings. To address such misunderstandings usually requires the intervention of a crypto CPA.
Although IRS misinterpretations of the 1099-K are typically resolved, their effect on customers was burdensome enough to prompt Coinbase and some other crypto exchanges to stop sending these tax forms.
Does Coinbase send a 1099-B?
The short answer is: no. At time of writing, Coinbase only reports Form 1099-MISC to the IRS. This information is subject to change, so be certain to look out for updates from Coinbase and Coinbase Pro (soon to be Coinbase Advanced).
Accessing your Coinbase tax documents
Even if you don't receive a 1099-MISC from Coinbase, you need to report any income or capital gains/losses you've realized on the exchange. Many crypto tax calculators, TokenTax included, can sync to Coinbase via API so that transaction history is automatically imported and updated.
However, if you need to download a copy of your transaction history for record-keeping or your accountant, you can do so by visiting the Taxes section of your account. Here you can download gain/loss reports and raw transaction history CSVs. You can also see if Coinbase has issued any forms about you to the IRS.
Frequently asked questions
Here are some common FAQs related to Coinbase IRS reporting, the Coinbase 1099, and Coinbase taxes and tax documents. These apply to both Coinbase and Coinbase Pro.
Do I pay taxes on Coinbase transactions?
Yes, you must pay the appropriate taxes on Coinbase transactions. Our crypto tax software makes reporting Coinbase taxes easy.
Will Coinbase send me a 1099?
$600 is the current Coinbase IRS reporting threshold. Currently Coinbase sends form 1099-MISC for users who are U.S. traders who made more than $600 from crypto rewards or staking in the last tax year. You can also access Coinbase tax documents through the Coinbase mobile app.
H3 Do all crypto exchanges report to the IRS?
No, every cryptocurrency exchange does not report to the IRS. Many exchanges are based internationally and do not do business in the United States. That said, if you’re in the United States or are a United States citizen, you are responsible for reporting your crypto transactions to the IRS.
Can the IRS see my crypto wallet?
Crypto wallets interact with publicly visible blockchains, so yes, the IRS can “see your crypto wallet.” That said, depending on the wallet and the nature of your transactions, it’s possible the IRS cannot correlate a specific wallet with you as a user. That noted, Coinbase runs a KYC (know your client) process, and analytics firms like Chainalysis have working partnerships with the Federal Government.
So it’s fair to assume you can’t (and obviously should not) “hide” your crypto transactions from the IRS, as of course you need an on- and off-ramp to bring fiat into and out of your crypto wallet. This is almost always done through a centralized exchange like Coinbase, which of course reports to the IRS.
What happens if you don't report Coinbase taxes?
If you don’t report Coinbase taxes, you could get in trouble with the IRS and receive a Failure to File penalty. This penalty begins at 5% of the unpaid taxes for each month (or part of a month) your tax return is late, not to exceed 25% of unpaid taxes. If the IRS determines an overt act of evasion occurred, willful failure to file could be treated as a felony. So you’ll definitely want to report Coinbase taxes.
How do I avoid Coinbase taxes?
A simple way to avoid Coinbase taxes is to purchase and hold without exchanging or selling. Other options to avoid or reduce your Coinbase taxes include:
Like any other income, however, if you have significant gains through Coinbase or Coinbase Pro, you’ll need to properly file them as part of your tax return. For more info on crypto tax basics, visit our Crypto Tax Guide.
FAQs
Yes. Coinbase reports your cryptocurrency transactions to the IRS before the start of tax filing season. As a Coinbase.com customer, you'll receive a 1099 form if you pay US taxes and earn crypto gains over $600. Yes.
Does Coinbase report less than 600 to IRS? ›
Yes, Coinbase reports to the IRS. It sends Forms 1099-MISC to the IRS for U.S. traders who made more than $600 in crypto rewards or staking. $600 is the Coinbase IRS reporting threshold for tax year 2022.
At what point does Coinbase report to IRS? ›
If you earn $600 or more in a year paid by an exchange, including Coinbase, the exchange is required to report these payments to the IRS as “other income” via IRS Form 1099-MISC (you'll also receive a copy for your tax return).
Does Coinbase report losses to IRS? ›
As the name suggests, your gain/loss report is a roundup of every transaction you made on Coinbase that resulted in a capital gain or loss, like selling, spending, or converting crypto. Note: today, Coinbase won't report your gains or losses to the IRS.
What happens if you don't report Coinbase taxes? ›
After an initial failure to file, the IRS will notify any taxpayer who hasn't completed their annual return or reports. If, after 90 days, you still haven't included your crypto gains on Form 8938, you could face a fine of up to $50,000.
What happens if you don't pay Coinbase taxes? ›
If you don't report taxable crypto activity and face an IRS audit, you may incur interest, penalties, or even criminal charges. It may be considered tax evasion or fraud, said David Canedo, a Milwaukee-based CPA and tax specialist product manager at Accointing, a crypto tracking and tax reporting tool.
Do I have to report crypto less than $100? ›
How much do you have to earn in crypto before you owe taxes? You owe taxes on any amount of profit or income, even $1. Crypto exchanges are required to report income of more than $600 for activities like staking, but you still are required to pay taxes on smaller amounts.
Do I have to report crypto gains under $600? ›
Do you have to report crypto interest under $600? Remember, you're required to report all of your cryptocurrency income, regardless of whether your exchange sends you a 1099 form.
Do I have to report small crypto on taxes? ›
The IRS treats cryptocurrency as “property.” If you buy, sell or exchange cryptocurrency, you're likely on the hook for paying crypto taxes. Reporting your crypto activity requires using Form 1040 Schedule D as your crypto tax form to reconcile your capital gains and losses and Form 8949 if necessary.
What happens if you don t report cryptocurrency on taxes? ›
If you don't report a crypto-taxable event, you could incur interest, penalties, or even criminal charges if the IRS audits you. You may also even receive a letter from the IRS if you failed to report income and pay taxes on crypto, or do not report your transactions properly.
If the IRS has your records from an exchange and you haven't reported crypto on your tax returns—or if what you reported doesn't match the IRS's records—this could trigger a cryptocurrency audit or worse.
Will Coinbase send me a 1099? ›
Coinbase issues an IRS form called 1099-MISC to report miscellaneous income rewards to US customers that meet certain criteria. You can find all of your IRS forms in the Documents section of your Coinbase Tax Center. Coinbase no longer issues an IRS Form 1099-K.
Do I need to report crypto if I didn't sell? ›
Buying crypto on its own isn't a taxable event. You can buy and hold cryptocurrency without any taxes, even if the value increases. There needs to be a taxable event first, such as selling the cryptocurrency. The IRS has been taking steps to ensure that crypto investors pay their taxes.
How does IRS track cryptocurrency? ›
In addition, exchanges like Coinbase, Gemini, and Kraken issue 1099 forms to customers and to the IRS reporting on your crypto transaction activity. If you don't report transactions that have been reported to the IRS via Form 1099, you may automatically be sent a warning letter about your unpaid tax liability.
Why didn t Coinbase send me a 1099? ›
Coinbase stopped issuing Form 1099-Ks after 2020 because of the confusion they caused. Because the forms showed total transaction volume, 1099-Ks resulted in thousands of Coinbase customers receiving CP2000 letters from the IRS claiming they significantly underreported their income for the year.
Will I get audited if I don't report crypto? ›
Crypto exchanges can issue you three tax forms: Form 1099-K, Form 1099-B, and Form 1099-MISCs. If you don't report the amounts reported on these forms on your tax return, you will receive a CP2000 letter and be subject to a correspondence audit.
How do I avoid paying tax on Coinbase? ›
As long as you are holding cryptocurrency as an investment and it isn't earning any income, you generally don't owe taxes on cryptocurrency until you sell. You can avoid taxes altogether by not selling any in a given tax year.
Do I have to report crypto if I made less than 10k? ›
The short answer is yes. The more detailed response is still yes; you have to report and potentially pay taxes on any crypto transaction that results in a taxable event with gains or losses. While not every crypto transaction is a taxable event, many are.
Does Coinbase keep track of gains and losses? ›
Coinbase Gain/Loss Report
Coinbase customers will be able to generate a Gain/Loss Report that details capital gains or losses using the cost basis specification strategy in their tax center settings: customers can choose between a HIFO (highest in, first out), LIFO (last in, first out), and FIFO (first in, first out).
How do I cash out crypto without paying taxes? ›
Can You Cash Out Bitcoins Tax-free in the U.S.? Some people can cash out Bitcoins tax-free in the U.S. Investors who do not exceed a $78,570 income can cash out at a 0% capital gains tax rate. You can also avoid taxes by investing Bitcoin in strategic investment accounts or modifying your citizenship.
You are required to report all of your taxable income from cryptocurrency on your tax return, regardless of the amount. Do I pay taxes on crypto if I lose money? Reporting capital losses comes with a tax benefit. Reporting capital losses can offset capital gains and up to $3,000 of personal income.
How much money in crypto do you have to report on taxes? ›
For 2022, you can also avoid paying taxes when selling your cryptocurrency if your table income is less than or equal to $41,675 if you file as a single person, as married, filing separately, or your taxable income is less than or equal to $83,350 if you file jointly as a married couple.
Is all crypto reported to IRS? ›
Transactions involving a digital asset are generally required to be reported on a tax return. Taxable gain or loss may result from transactions including, but not limited to: Sale of a digital asset for fiat. Exchange of a digital asset for property, goods, or services.
Will I get audited for crypto? ›
Many tax agencies are increasing their scrutiny of crypto tax returns. Most crypto tax filers will not be audited, but some will. The best way to prepare for possibility of a crypto tax audit is to keep thorough records of all crypto transactions and any related communications.
Does the IRS know I own crypto? ›
Yes, the IRS can track crypto as the agency has ordered crypto exchanges and trading platforms to report tax forms such as 1099-B and 1099-K to them. Also, in recent years, several exchanges have received several subpoenas directing them to reveal some of the user accounts.
What crypto wallet does not report to IRS? ›
Which crypto exchanges do not report to the IRS? There are a number of crypto exchanges that do not issue 1099 forms nor collect KYC data for most small traders including: KuCoin. OKX (excluding for P2P trades)
How do I file taxes with Coinbase? ›
Navigate to your Coinbase account and find the option for downloading your complete transaction history. Import your transaction history directly into CoinLedger by mapping the data into the preferred CSV file format. CoinLedger automatically generates your gains, losses, and income tax reports based on this data.
Does Coinbase send tax paperwork? ›
Coinbase will issue an IRS form called 1099-MISC to report miscellaneous income rewards to customers that meet the following criteria: You're a Coinbase customer AND. You're a US person for tax purposes AND.
How do you answer IRS crypto question? ›
In other words, if you simply held your cryptocurrency and did not make any sales or earn any crypto income during the 2022 tax year, you do not need to answer 'Yes' to the Form 1040 question. However, you should check 'Yes' if you've gifted crypto to a friend or family member.
Why does the IRS ask if I bought cryptocurrency? ›
The IRS considers cryptocurrency holdings to be “property” for tax purposes, which means your virtual currency is taxed in the same way as any other assets you own, like stocks or gold.
Buying and selling crypto doesn't trigger an audit, but the IRS does ask you to report multiple types of crypto transactions and accurately report your gains or losses.
Do you have to report every crypto transaction to the IRS? ›
You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return.
Are all crypto transactions reported to IRS? ›
Transactions involving a digital asset are generally required to be reported on a tax return. Taxable gain or loss may result from transactions including, but not limited to: Sale of a digital asset for fiat. Exchange of a digital asset for property, goods, or services.
Are Coinbase transactions monitored? ›
Pursuant to Part 504 of the Superintendent's Regulations, Coinbase is required to have a system in place for monitoring transactions after their execution for potential money laundering and terrorist financing violations and suspicious activity reporting.
Are Coinbase transactions traced? ›
Bitcoin transactions are traceable because Bitcoin's blockchain is completely transparent and every transaction is publicly stored on a distributed ledger.
How does IRS know if you own crypto? ›
Yes. A variety of large crypto exchanges have already confirmed they report to the IRS. Back in 2016, the IRS won a John Doe summons against Coinbase. A John Doe summons compels a given exchange to share user data with the IRS so it can be used to identify and audit taxpayers, as well as prosecute those evading taxes.
Can you get in trouble for not reporting crypto? ›
The simplest answer to this question is — yes! All of your bitcoin profits, gains, and exchanges must be reported to the IRS. If the IRS has reason to believe you have engaged in tax fraud, they may audit you. Years from now, investors may be hit with an inquiry and a tax bill they are unable to pay.
Do you have to report crypto under $600? ›
Do you have to report crypto interest under $600? Remember, you're required to report all of your cryptocurrency income, regardless of whether your exchange sends you a 1099 form.
Will the IRS audit you for crypto? ›
The IRS have made it clear they're increasing audits on taxpayers involved in crypto. That much was obvious when they included the question “At any time during 2021, did you receive, sell, exchange or otherwise dispose of any financial interest in any virtual currency?” on the Form 1040 Individual Tax Return for 2020.
How does taxes work on Coinbase? ›
If you're holding crypto, there's no immediate gain or loss, so the crypto is not taxed. Tax is only incurred when you sell the asset, and you subsequently receive either cash or units of another cryptocurrency: At this point, you have “realized” the gains, and you have a taxable event.
As a public company with audited financials, Coinbase already has the traditional approach in place. What you may not know is that this method also uses cryptographic proofs in some ways. Our financials are subject to quarterly external auditor review, and we also file annual audited financial statements with the SEC.
Can police track Coinbase? ›
A fundamental characteristic of blockchain technology is transparency, meaning that anyone, including the government, can observe all cryptocurrency transactions conducted via that blockchain. Bitcoin transactions are publicly accessible because of the transparent nature of blockchain technology.
Can FBI trace cryptocurrency? ›
Investigators can trace transactions to cryptocurrency exchange locations or other “choke points” that require the user to sign up using their true identification. From this point, the law enforcement officer can get a warrant to force the exchange to divulge the real identity of the account owner.
Can police track crypto transactions? ›
If the bitcoin wallet is not encrypted, law enforcement has complete access (provided proper warrants have been obtained for the seizure of the device).
