Exchanges like Coinbase provide transaction history to every customer, but only customers meeting certain mandated thresholds will also receive an IRS Form 1099-K. But what can we do with it and how to use it in filing taxes?
Introduction
You would have received a 1099-K from Coinbase Pro. All it really says is how much money you had IN from everywhere. It doesn’t display any info on how much you made/lost with each trade.
So, what can do you do with this 1099-K?
Coinbase’s 1099K form is a kind of consolidated information describing the volume of your trades (Exchanges like Coinbase provide transaction history to every customer, but only customers meeting certain mandated thresholds will also receive an IRS Form 1099-K.).
Even though you could have just traded with $10K — it will have all the buys and sells and the final number looks daunting. This won’t be much use for filing your taxes. As mentioned above, this is form sent to traders on Coinbase who have exceeded a threshold.
This is a similar situation that happened to one of my friends last January.
Following are two options:
Have used ONLY Coinbase
If you have just traded ONLY on Coinbase, you can use their tax center and download tax form, which can be used to upload on TurboTax Online or provide to your tax preparer/CPA.
Traded on other exchanges too (80% of users)
If you have traded on Coinbase and other exchanges — then the tax form provided by Coinbase is of no use (see below for exclusions)
Coinbase’s disclaimer
In this case, you would have to use third party cryptocurrency tax software like BearTax (really wish they will be bearish about taxes and reduce the tax liability!) where you can import your transactions from Coinbase and almost every other exchange, review them and calculate your capital gains or losses.
Gain-Loss Summary on BearTax
They will provide you with appropriate tax forms like 8949 Capital Gains Form, CSV Export which can be imported on Turbotax Online, Export to TaxAct format for accountants or a generic CSV.
BearTax - Cryptocurrency Tax Software for Traders & Accounting Firms_Signup now for the best cryptocurrency tax software that is used by thousands of cryptocurrency taxpayers in the US to calculate and download their tax documents…_bear.tax
Their support staff is very responsive. If you got any questions reach out to them using chatbox on their website or Twitter or Facebook or Telegram.
Disclaimer
I am neither a professional accountant nor a financial consultant. All of the following information is provided for informational purposes only. Information compiled above could be a result of specific use-cases faced by people I know and not always applicable to every individual. So, it is not intended to substitute for tax, audit, accounting, investment, financial, nor legal advice. For financial, tax, or legal advice please consult your own professional.