Looking to report taxes on your Coinbase transactions?
Dealing with cryptocurrency taxes can feel stressful. Still, with increasing regulatory scrutiny on the cryptocurrency ecosystem, it’s more important than ever for investors to accurately report their crypto transactions.
In this guide, we’ll break down everything you need to know about how Coinbase transactions are taxed. But first, let's cover an easy way to report your complete Coinbase transaction history to the IRS in minutes.
You can generate your gains, losses, and income tax reports from your Coinbase investing activity in minutes by connecting your account with CoinLedger.
There are a couple different ways to connect your account and import your data:
Both methods will enable you to import your transaction history and generate your necessary crypto tax forms in minutes. File these forms yourself. take them to your tax professional, or import them into your preferred tax filing software like TurboTax or TaxAct.
Interested in getting started? Create a CoinLedger account today.
Cryptocurrencies like Bitcoin are treated as property by the IRS and many other governments around the world. Other forms of property that you may be familiar with include stocks, bonds, and real-estate.
Just like these other forms of property, cryptocurrencies are subject to both capital gains and income taxes. You will be required to report taxable events on your tax return.
You’ll incur capital gains or losses if you sell your cryptocurrency, trade it for other cryptocurrencies, or use it to buy goods and services.
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Meanwhile, earning cryptocurrency through staking, mining, or interest rewards should be reported as personal income and will be taxed accordingly.
For a complete and in-depth overview, please refer to our Ultimate Guide to Cryptocurrency Taxes.
To do your cryptocurrency taxes, you need to calculate your gains, losses, and income from your cryptocurrency investments in your home fiat currency (for example, US Dollars).
Once you have your calculations, you can fill out the necessary tax forms required by your country. For more information, check out our guide to reporting your crypto taxes.
Currently, Coinbase offers staking rewards for select coins. It’s important to remember that staking rewards are considered personal income and will be taxed accordingly.
If you’ve earned more than $600 in staking/interest rewards, Coinbase will send a 1099-MISC form to you and the IRS (more on this later).
In 2021, Coinbase announced that it was releasing a marketplace where users could buy, sell, and mint NFTs.
Trading crypto for an NFT is considered a disposal event, and you’ll be required to incur capital gains or losses depending on how the price of your cryptocurrency has changed since you originally received it.
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Trading an NFT for cryptocurrency is also considered a disposal event. You’ll be required to incur capital gains or losses depending on how the price of your NFT has fluctuated since you originally received it.
For more information, check out our complete guide on NFT Taxes.
In short, it depends.
You may not have to “pay” taxes if you only had capital losses (i.e. you lost money on all of your crypto investments); however, you still have to report your crypto activity on your taxes yearly—even if you only had losses on your tax return.
If you had capital gains or crypto income for the year, you will need to pay taxes on your earnings.
Many cryptocurrency investors use additional exchanges and platforms outside of Coinbase. Perhaps you trade on Uniswap or earn interest from BlockFi. Unfortunately, this can cause issues from a tax reporting perspective.
Coinbase's reporting only extends as far as the Coinbase platform. If you use additional cryptocurrency wallets, exchanges, DeFi protocols, or other platforms outside of Coinbase, Coinbase can't provide complete gains, losses, and income tax information.
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Coinbase states that their tax calculators won't be accurate if you:
Coinbase does offer reports to help you accurately report your taxes. The Coinbase Transaction History CSV file contains a record of all of your buys, sells, transfers, and investment activity that occurred within your Coinbase account.
You can use this file to calculate your gains, losses, and income, or you can import this report directly into crypto tax software like CoinLedger.
As discussed earlier, Coinbase cannot calculate their customers’ taxes if they make transactions outside of the platform. Because of this limitation, Coinbase does not send 1099-B's with cost basis information like traditional brokerages.
This may change in the near future.
The American infrastructure bill will require major cryptocurrency exchanges to send 1099-B forms to customers and the IRS. However, since most cryptocurrency investors use multiple exchanges, it’s likely that these forms will have incomplete information.
Ultimately, it’s up to you to keep a complete record of your cryptocurrency transaction history. CoinLedger will do this automatically for you. The platform can integrate with Coinbase and any other platform you are using to make filing your taxes easier than ever.
In prior years, Coinbase has sent out 1099-K forms to customers. This has caused confusion amongst taxpayers as 1099-K only reports gross proceeds from your Coinbase transactions (not cost basis). As a result, these forms can make it appear as though you have made inaccurately large sums of money on Coinbase.
Due to this confusion, Coinbase has since stopped issuing Form 1099-K.
You can learn more about what to do if you receive a 1099-K here.
1099 information reporting has been around for a long time. There are multiple types of 1099’s in existence today (1099-K, 1099-MISC, 1099-B, 1099-DIV, etc.).
Each of them serve the same general purpose: to provide information to the Internal Revenue Service (IRS) about certain types of income from non-employment-related sources. Put another way, 1099’s are sent out to report on the income that you received that wasn’t from an employer.
1099’s give both you and the IRS records of your non-employment income. If the IRS receives a 1099 detailing income that you did not report on your tax return, you will be retroactively charged penalties and interest on your tax payment.
Learn more about how Coinbase reports to the IRS.
Coinbase reports some of your transaction activity to the IRS if you meet certain criteria. Coinbase will send you and the IRS a 1099-MISC if:
- You are a Coinbase customer AND
- You are a US person for tax purposes AND
- You have earned $600 or more in rewards or fees from Coinbase Earn, USDC Rewards, and/or Staking in 2020.
Remember, the 1099-MISC that Coinbase provides is not a complete record of your cryptocurrency transaction history. The form simply shows your net income from staking and rewards.
You’ll still need to keep track of each one of your individual cryptocurrency transactions for tax reporting purposes.
1099-MISC forms contain the taxpayer’s name, the amount of income they earned, and their account number. Failing to report this information to the IRS will likely increase the likelihood of a cryptocurrency tax audit.
In the past, the IRS has sought more detailed information from Coinbase. In 2016, the IRS issued a ‘John Doe Summons’ to Coinbase to request the data of more than 13,000 customers.
In this case, the IRS received each customer’s name, address, birthday, taxpayer ID, as well as a complete record of their transaction history with the platform.
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