Back in 2020, Coinbase announced that they would no longer issue Form 1099-K to their users, and instead would issue Form 1099-MISC to certain users for tax year 2020 and beyond. This was great news for users of the largest cryptocurrency exchange in the US, since the 1099-K created some major tax headaches.
However, the 1099-MISC from Coinbase still may not provide everything you need to properly report crypto taxes.
Read on to learn more about why this form is issued, who receives it, and what to do with this tax form.
What does the Coinbase 1099-MISC report?
The 1099-MISC from Coinbase includes any rewards or fees from Coinbase Earn, USDC Rewards, and/or staking that a Coinbase user earned in the previous tax year. It does not include any income made from selling and trading crypto, nor will it cover other taxable transactions such as purchases of goods or services made with crypto.
Who receives a 1099-MISC from Coinbase?
According to the company website, you will receive this tax form from Coinbase if:
- You used Coinbase, Coinbase Pro, or Coinbase Prime in 2020 or beyond
- AND you earned $600 or more in rewards or fees from Coinbase Earn, USDC Rewards, or staking during the year
While users who don’t qualify to receive the Coinbase 1099-MISC form will not receive any other tax forms from the exchange, it’s required to report cryptocurrency taxes regardless of whether you receive any such forms.
What to do with Coinbase tax documents
While most people think crypto tax reporting is exclusively related to capital gains and losses, this isn’t the case. Coinbase tax documents report cryptocurrency that is taxed as regular income. Where this income is reported depends on your employment status.
Self-Employed (Business Owners, Freelancers, and Independent Contractors): If you are self-employed and your crypto activities are part of a trade or business, the information contained on the Coinbase 1099-MISC will be reported on Schedule C.
Not Self-Employed: For individuals who are not self-employed and who file Form 1040, the Coinbase 1099-MISC information will be reported as “Other income” on Schedule 1, Line 8 of their annual tax return.
If you had any additional cryptocurrency activity—for example, if you traded crypto on Coinbase, bought anything with crypto, or traded on any other exchanges—then the Coinbase 1099-MISC will unfortunately not include everything you need for a full crypto tax report. Watch our Crypto Tax 101 webinar for step-by-step instructions on how to report cryptocurrency taxes.
Does Coinbase report to the IRS?
Yes. When Coinbase sends out Form 1099-MISC, it sends out two copies. One goes to the eligible user with more than $600 from crypto rewards or staking, and the other goes directly to the IRS. Therefore, if you have received a Form 1099-MISC from Coinbase, then the IRS has received one as well.
About the Form 1099-K from Coinbase
While Coinbase is no longer issuing Form 1099-K to users, you may still see the effects of this tax form if you used Coinbase between 2014 and 2019.
Whereas a 1099-MISC reports ordinary income from Coinbase, Form 1099-K only reports total sales volume—not your cost basis (the amount you initially paid for your crypto). Thus, the 1099-K tends to overreport the total amount of capital gains you have because it does not take into account how much you paid for the crypto that you later sold.
The IRS has sent crypto notices to thousands of crypto traders who they suspected of underreporting income. Coinbase users have received IRS Letters 6174, 6174-A, or 6173; IRS Notice CP2000; and IRS Notice CP2501. These notices are often based on incomplete information from Form 1099-K.
So even though the 1099-MISC is fairly incomplete, it’s definitely an improvement over the tax forms that Coinbase used to send!
Watch our video from 2020 explaining the implications of Coinbase switching their tax forms.
Need help with Coinbase tax forms?
If you’re a cryptocurrency investor or trader using Coinbase (or any other exchange, for that matter), call our experienced crypto tax attorneys for all your reporting needs! We’ve been dealing with cryptocurrency taxes since 2014 and have helped hundreds of investors report properly to avoid penalties.