Coinbase Scraps Bitcoin Tax Form That Led Users to Overpay

In letter

  • Coinbase is scrapping an old tax form.
  • The new form goes to anyone who has earned at least $ 600 with certain Coinbase products.
  • The old form has been plagued with problems, but the new one is far from free of them, said a crypto tax expert Decrypt.

Cryptocurrency Exchange Coinbase is issuing a new tax form to replace one caused some people to overpay their bitcoin and crypto taxes. But just like the old form, the new one has limited utility to taxpayers, said a crypto tax expert Decrypt.

As discovered by Shehan Chandrasekera, Head of Tax Strategy at Crypto Tax Firm CoinTracker, Coinbase has updated a help page to inform customers that the old tax form has been abandoned, with which customers will receive all proceeds from transactions carried out on the platform in favor of a form that only contains information about money made with the interest-bearing products of Coinbase was earned.

The San Francisco crypto exchange is scrapping the 1099-K that provided clients with information about trades they placed on the platform. This form has been made available to anyone who traded at least 200 transactions over $ 20,000 in the tax year.

Under US tax law, taxpayers are required to report profits from trading cryptocurrencies and interest from crypto loan logs.

However, the 1099-K form of Coinbase omitted information about the “cost base” – how much someone paid for a cryptocurrency they sold on the platform – which is vital for anyone trying to get capital gains tax to calculate. The forms of Coinbase were therefore useless.

You made some Overpayment of taxes, according to Coindeskas the IRS was sending letters based on Coinbase’s estimates. To be clear, tThe confusion was due to the tax form itself and a general unconsciousness about how to file crypto taxes among users rather than a Coinbase-specific bug.

Instead, Coinbase will in future issue a new form called “Coinbase” 1099-MISCto all customers subject to US tax law and who earned more than $ 600 in 2020 with Coinbase Earn, USDC Rewards and / or staking.

It is unclear whether the form also includes a comprehensive list of the cryptocurrency trades carried out on Coinbase (Decrypt has resorted to clarification). The bar for receiving such a form is also lower. “Essentially, they are making more users these reporting requirements,” said Chandrasekera Decrypt.

Like the old Form 1099-K, the new Form 1099-MISC “will not be useful either because it does not indicate your cost base,” said Chandrasekera.

Of course, Coinbase cannot tell users how much they paid for cryptocurrencies. For example, a customer may have bought cryptocurrencies from Uniswap and then sold them on Coinbase.

Coinbase still issues the form to its customers because under US law, the crypto exchanges must provide their customers with relevant tax forms in order to send the tax returns they have submitted to the US tax office, the Internal Revenue Service.

Additional review on issuance of these forms following an IRS review last month by the U.S. Treasurer for Tax Administration which found that no major exchanges issue a sufficient number of tax forms.

Coinbase may face additional scrutiny from the IRS, or to prepare its company for an alleged public listing, Coinbase is improving its game, Chandrasekera said.

Chandrasekera said the uselessness of the new shapes is not that important. “These forms don’t give you everything you need to file your taxes correctly,” he said.

“But at the end of the year, these forms give you the main signal: you need to talk to a CPA and do something. The IRS will appreciate that. “