Coinbase Issues 1099s: Reminds Users to Pay Taxes on Bitcoin Gains
The question of the relationship between cryptocurrencies and the U.S. tax system may be reaching a resolution, at least for some individuals. Users of the popular digital currency exchange Coinbase will receive 1099-K tax forms if they met certain criteria over the previous year.
The San Francisco-based exchange issued 1099 tax forms on January 31 to some American customers who have received cash in excess of the required reporting threshold, Bitcoin.com reported. (See also: Bitcoin IRS Tax Guide For Individual Filers.)
200 Receipt Transactions or $20,000
Which Coinbase customers are set to receive tax forms? Those who have exceeded either $20,000 in cash received for the calendar year 2017, or who have more than 200 receipt transactions on the exchange.
While many of the users set to receive the forms are individuals, forms will also be issued to “business use” accounts and GDAX accounts, provided that they meet the above thresholds for taxation.
In the case of “business use,” this term is designed to apply to those accounts which received payments in exchange for goods or services. It does not include payments made for mining proceeds or payments which were the result of a transfer between wallets held by the same user.
Some Coinbase Users Not Happy
For the “business use” provision, Coinbase indicated that it has “used the best data available…to determine whether your account activity qualifies as Business Use, including but not limited to factors such as completion of a merchant profile or enabling merchant tools.”
Unsurprisingly, many Coinbase customers who have received tax forms are unhappy with the development. Cryptocurrency enthusiasts often hold that the decentralized and unregulated holdings should not be subject to taxation in the same way as other investment vehicles are. (See also: (See also: How the New Tax Law Impacts Cryptocurrencies.)
To make matters worse, some customers feel Coinbase surprised them with the tax form and are now upset because they were not notified regarding the figures that constitute the threshold requirements.
Individuals who believe that they have received tax forms from Coinbase in error are urged to contact the exchange via their support channels and to consult with a tax professional. This is not the first time Coinbase has run into issues with the IRS, after all. (See a;so: Coinbase Loses Court Case Vs IRS: Must Hand Over User Info.)
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns cryptocurrencies.
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