What To Do With Your Coinbase Tax Documents? Let’s Find Out!

What To Do With Your Coinbase Tax Documents

What To Do With Your Coinbase Tax Documents? Let’s Find Out!

As for the Coinbase announcement in 2020, it was addressed that Form 1099-K will no longer be issued to the users, but will be replaced with the 1099-MISC form for the taxpayer from 2020 and beyond. This was in fact the best news for the crypto users of the largest cryptocurrency exchange in the US, as the form earlier (1099-K) was some piece of work, causing headaches throughout.

Having said that, this does not necessarily mean that the 1099-MISC from Coinbase would serve with everything you might need to report crypto taxes.

If so, why was this form issued in the first place? Who receives it and what can one do with this updated form?

If you have questions like these arising in your mind, then be rest assured as you’ve landed on the best blog to help you find answers and be on a better stage to take necessary actions.

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Coinbase 1099-MISC: What Does It Report?

The 1099-MISC form issued by Coinbase includes fees or rewards that one earns from Coinbase, stalking, and/or USDC Rewards in the previous tax year.

Nevertheless, it, however, does not include any kind of income made via selling and trading a crypto coin and also any other taxable transactions like purchasing goods or services using crypto.

Coinbase 1099-MISC: Who Receives It?

As per Coinbase, a crypto taxpayer is eligible to receive this tax form from Coinbase if either of the following statements stands true:

  • If you ended up using Coinbase, Coinbase Prime, or Coinbase Pro in the previous year (2020) or beyond
  • Or, if you earned around $600 or more as rewards or fees from Coinbase Earn, stalking, or USDC Rewards in a year

Those who do not qualify as above will not receive the Coinbase 1099-MISC form or any other form for that matter. Nevertheless, irrespective of it all, one must not forget to report cryptocurrency taxes regardless.

Coming to the question of the hour…

What To Do With The Coinbase Tax Documents?

While most crypto owners usually misinterpret crypto tax reporting as an exclusive act related to capital gains and losses, the case is rather the opposite.

Coinbase tax documents report the taxed crypto as a regular income where the income depends upon the status of your employment. Here are a few instincts to consider:

1.  Self-Employed

This includes any kind of Business Owners, Independent Contractors, and Freelancers. In this case, the crypto activities would be a part of a trade or business with the information noted on the Coinbase 1099-MISC form. This must be reported on Schedule C.

2. Employed

For those not self-employed and filing in Form 1040, the 1099-MISC Coinbase information must be reported under “Other income” on Schedule 1, Line 8 of the annual tax return.

On the other hand, if there is any additional cryptocurrency activity, such as if you had traded crypto on Coinbase, bought an asset using crypto, and/or traded for an exchange, then the Coinbase 1099-MISC form wouldn’t include all you might need for a full crypto tax report.

Coinbase On Reporting To The IRS

As with any other cryptocurrency present in the market space, Coinbase reports to the IRS via sending out the 1099-MISC form. The form here is sent out in two copies, one that goes to the eligible user who has more than $600 obtained from the crypto stalking or rewards, while the other is sent to the IRS directly. In this case, you have received the 1099-MISC form from Coinbase, there is a possibility that the same be sent to the IRS.

To Conclude; Form 1099-K from Coinbase, A Better Option

  • Given from the article above, Coinbase is now no longer issuing the 1099-K Form to crypto users, however, irrespective of the shift, you might still be able to see the effects of the tax form if you use Coinbase between 2014 and 2019.
  • As for the new form – 1099-MISC, the reports are made for ordinary income from Coinbase, unlike Form 1099-K that reported the total sales volume and not the cost basis. This ends up in overreporting the total amount of gains as the account of the paid amount for crypto that was later sold is not kept on track.
  • Speaking of the numbers, the IRS has said to have sent thousands of crypto notices of crypto traders who were suspected of underreporting an income. This included IRS Letters 6174,6173, or 6174-A; IRS Notice CP2501, and IRS Notice CP2000 – based on incomplete information filled in Form 1099-K.

So even though the 1099-MISC is still fairly incomplete, it is a rather better shot and a step towards an improvement over the tax forms

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FAQs:

When does a crypto taxpayer receive the 1099-MISC form?

As per Coinbase, a crypto taxpayer is eligible to receive this tax form from Coinbase if either of the following statements stands true:

  • If you ended up using Coinbase, Coinbase Prime, or Coinbase Pro in the previous year (2020) or beyond
  • Or, if you earned around $600 or more as rewards or fees from Coinbase Earn, stalking, or USDC Rewards in a year

What does the 1099-MISC form include?

The 1099-MISC form issued by Coinbase includes fees or rewards that one earns from Coinbase, stalking, and/or USDC Rewards in the previous tax year.

What does a self-employed person do with a Coinbase tax document?

Self-employed individuals include Business Owners, Independent Contractors, and Freelancers. Here, the crypto activities would be a part of a trade or business with the information noted on the Coinbase 1099-MISC form. This must be reported on Schedule C.

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