Cryptocurrency exchange Coinbase has decided to halt sending customers 1099-Ks, the U.S. tax form which caused the Internal Revenue Service (IRS) to mistakenly suspect traders underreported their gains, reports Coindesk. Now, Coinbase will use the 1099-MISC form at least for customers who earn interest on lending and similar products.
- Coinbase will not issue form 1099-Bs and will only send 1099-MISC forms to users earning $600 or more in crypto from Coinbase Earn.
- If the 1099-MISC becomes standard for traders, “a lot more people are gonna get it because the threshold for getting a 1099-MISC is very low” – Stephen Chandrasekera, head of tax strategy at CoinTracker.
- Switching to 1099-MISC will help Coinbase improve its compliance status by subjecting more users to reporting requirements.
- The switch to 1099-MISC does not solve the “cost-basis issue” since the form does not have a place to report the price the cryptocurrency was purchased. – Chandrasekera.
- Traders who do not meet the criteria for 1099-MISC will likely not receive any forms from Coinbase to prepare their tax returns.
- The decision by Coinbase follows a recent move by the IRS to send crypto users dozens of notices warning that they had underreported their holdings.
- Form 1099-K can often be confusing since it reports only the gross proceeds of crypto transactions without considering the base price.
- Customers who did not receive any forms from Coinbase and sold or converted crypto in 2020 are still responsible for reporting to the IRS.
Cryptocurrencies are currently declining. BTCUSD is down 8.07%, ETHUSD is down 10.76