Nov 24, 2020 at 10:25 p.m.UTC Coinbase Ditches US Customer Tax Form That Set Off False Alarms at IRS
Cryptocurrency exchange Coinbase has decided to discontinue sending customers 1099-Ks, the U.S.tax form which led the Internal Revenue Service (IRS) to mistakenly think traders had underreported their gains.
The exchange will instead use the 1099-MISC form, at least for customers who earn interest on lending and similar products, it said in a Tuesday blog post, The post appeared to suggest that traders who do not meet the criteria for the 1099-MISC will likely not receive any kind of forms from Coinbase to help prepare their returns.When asked for comment, a Coinbase spokesperson simply sent CoinDesk a link to the post.
Coinbase said in the post that it will not issue IRS form 1099-Ks for the 2020 tax year.Used by some crypto exchanges to report transactions for eligible users, the 1099-K form can often be confusing because it reports only the gross proceeds of crypto transactions, without taking the base price into account.
Hence, the forms can sometimes show all transactions as generating revenue even if some may have actually caused a loss.If you bought a coin for $1 and sold it for 50 cents, your 50 cent loss would appear to be a gain, for example.This in turn may lead to exchanges reporting a significantly inflated tax burden for the user.
This scenario seems to have played out recently when the IRS sent at least dozens of crypto users notices warning that they had underreported their holdings.Such warning letters had also been sent to crypto users last year.
In its blog post Coinbase said that it will not issue form 1099-Bs either.
The crypto exchange’s post added that 1099-MISC forms will be sent to users who earn “$600 or more in crypto from Coinbase Earn, USDC Rewards, and/or Staking in 2020.” These are income-generating products, similar to bank deposits.
But the post also did not indicate whether in the absence of a form 1099-K, regular crypto sales would be recorded on the 1099-MISC forms as well.Customers who don’t receive any forms from Coinbase and sold or converted crypto in 2020 are still responsible for reporting to the IRS and should consult a tax professional, Coinbase said.
If the 1099-MISC became standard for traders, “a lot more people are gonna get it because the threshold for getting a 1099-MISC is very low” said Shehan Chandrasekera, head of tax strategy at CoinTracker, a portfolio monitoring service.Whereas a 1099-K is strictly for payees receiving more than 200 transactions a year worth over $20,000, the 1099-MISC would capture everyone getting $600 and up.
While switching to the 1099-MISC is “not a perfect solution” to problems faced in crypto tax reporting, it could help Coinbase improve its compliance status by subjecting more users to reporting requirements, Chandrasekera said.
He pointed out that the switch to a new form doesn’t solve the “cost basis issue,” because the 1099-MISC form also has no place to report the price a cryptocurrency may have been purchased for.Even if there were a place in the form, Coinbase wouldn’t necessarily be able to find the information, therefore making it the user’s responsibility to keep track of the price for which they bought the assets, said Chandrasekera, who is a certified public accountant (CPA).
Share this: ‘However Long It Takes’: Zuckerberg Vows to Win Over Regulators on Libra news Facebook CEO Mark Zuckerberg says the company will spend “however long it takes” to get regulators and others on board before launching the Libra cryptocurrency project.Speaking during a quarterly earnings call on Wednesday, the social media giant’s founder sought to assure investors that Facebook would act responsibly with its development of Libra, the… Never Mind Consumers, This Was a Year of Steady Infrastructural Progress Dec 11, 2019 at 14:30 UTCUpdated Dec 11, 2019 at 15:20 UTCJake Brukhman, Coinlist FounderThis post is part of CoinDesk’s 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world.Jake Brukhman is the founder and managing director of CoinFund.After a partial recovery in the… Blockchain Bites: China’s Miners, Africa’s Venmo and Cuba’s New Exchange Apr 23, 2020 at 17:15 UTCPhoto by Nuno Alberto on UnsplashBlockchain Bites: China’s Miners, Africa’s Venmo and Cuba’s New ExchangeChina’s rainy season reduces the costs of bitcoin mining but investors aren’t biting, Starbucks and McDonald’s will pilot the “digital yuan” and Openfinance is threatening to delist tokens on its platform.Top ShelfMiner HardshipsSpring usually draws… SEC Chair Clayton: Crypto ETF Needs Exchanges ‘Free From Manipulation’ NEWS Jay Clayton, chairman of the U.S.
Securities and Exchange Commission (SEC), said Tuesday that he doesn’t see a pathway to a cryptocurrency ETF approval until concerns over market manipulation are addressed.“How that [manipulation] issue gets addressed, I don’t have a particular path.But it needs to be addressed” before an ETF gets approved,… Ripple Boosts Blockchain Advocacy Efforts With DC Office news Ripple has opened a new office in Washington, D.C.in a bid to strengthen its advocacy efforts for blockchain and cryptocurrency.
Announced on Tuesday, the blockchain payments technology provider said the new premises near the heart of U.S.
government comes alongside expansion of its global regulatory team as it ramps up efforts to educate policymakers… 40-Strong Blockchain Insurance Group B3i Appoints CEO news Insurance industry blockchain group B3i, which is now building DLT solutions for some 40 member firms, has appointed John Carolin as chief executive officer.Carolin, who joined B3i as chief financial officer in March 2018, had served as interim CEO since March of this year.B3i began life back in October 2016 as a… CoolBitX and Elliptic Team Up to Offer Crypto Firms Compliance Tools Jul 21, 2020 at 10:41 UTCElliptic founder and CTO James Smith (CoinDesk archives)Blockchain security firm CoolBitX and on-chain analytics company Elliptic are now pooling their technologies in a bid to help cryptocurrency firms better meet the demands of the Financial Action Task Force (FATF) and its so-called Travel Rule.Announced Tuesday, the two companies will… Binance’s New Platform Will Connect CeFi and DeFi With $100M Fund Sep 10, 2020 at 17:11 UTCUpdated Sep 10, 2020 at 17:23 UTCBinance CEO speaks at Consensus.(Credit: CoinDesk archives)Binance continues to chase after decentralized finance (DeFi) by giving its new decentralized Binance Smart Chain (BSC) access to its centralized exchange (CeFi).The global cryptocurrency exchange giant is putting up $100 million to support DeFi projects… Bitcoin Slides Back Below $10K Amid Quick Bearish Sell-Off Feb 19, 2020 at 23:52 UTCUpdated Feb 20, 2020 at 00:29 UTCBitcoin has dipped back below the psychological area of support near the $10,000 level amid a 20-minute bearish sell-off that took the markets by surprise.At around 21:30 UTC on Feb.19, the price of bitcoin (BTC) fell more than 4.5 percent from $10,086 to… .