Coinbase To Issue A New Crypto Tax Form For 2020

LONDON, ENGLAND – NOVEMBER 21: A visual representation of the cryptocurrency Bitcoin on November 21, … [+] 2020 in London, England. The price of bitcoin has risen sharply in the the last two months, to a high of around 18,800 USD, gaining nearly 100% since September. This rise has propelled the price of the cryptocurrency back to near it’s all-time-high of 20,000 USD, which it peaked at in December 2017. Since it’s inception in 2009, the price of bitcoin has seen many boom and bust cycles, with it’s proponents claiming it’s a revolution to the financial system, whilst it critics calling it a speculative bubble. (Photo by Jordan Mansfield/Getty Images)

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For the 2020 tax year, Coinbase is planning to issue a new tax form (1099-MISC) and abandon the Form 1099-K which created a tax nightmare for many taxpayers.

According to a brief help article published on Coinbase Tax Resource Center, 1099-MISC Forms will be issued to US Coinbase customers who have received $600 or more in cryptocurrency through Coinbase Earn, USDC rewards and/or staking income during 2020.

Prior to this change, Coinbase has been issuing Form 1099-Ks to US users who had more than 200 transactions and $20,000 in volume in any given year. This tax form only reported gross proceeds for the user and omitted critical cost basis information which was essential to accurately calculate your capital gain taxes. Lack of knowledge on how to accurately report this form on taxes lead to some recipients receiving IRS CP2000 tax notices and overpaying crypto taxes.

At this time it is unclear whether Coinbase will report regular cryptocurrency trading activity (cashing out crypto and exchanging one cryptocurrency with another) on Form 1099-MISC. If this were to happen, a significantly higher number of users will receive this new tax form compared to the old 1099-K form. This is because the the threshold for issuing a Form 1099-MISC ($600 or higher) is lower than the Form 1099-K (200 transactions and $20,000 in volume).

Finally, whether you receive a tax form or not, it’s your responsibility to report your gains and losses from cryptocurrency trading in your taxes.

Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional