Tax forms, explained: A guide to U.S. tax forms and crypto reports
Can't tell a 1099 from a 8949? Our guide to the 2021-2022 federal tax forms every U.S. crypto trader should know.
If you’re reading this, it’s probably everyone’s favorite time of year: tax season. As you figure out your tax bill, you might come across different forms and reports that try to capture how you used your crypto — whether you sold, staked, or HODLed. Figuring out what you owe on your assets can be tricky, even for the most seasoned tax professionals, so to help you avoid any issues with Uncle Sam, let’s break down a few common forms. We’ll explain what’s on each document, why you received it, and when you’ll need it.
First things first...
Coinbase doesn’t provide tax advice. This article represents our stance on IRS guidance received to date, which may continue to evolve and change. None of this should be considered as advice or an individualized recommendation, but it’s important to us that our readers have relevant information available to them in the most accessible way possible. Please consult a tax professional regarding your own tax circumstances.
Crypto can be taxed in two ways: either as income (a federal tax on the money you earned), or as a capital gain (a federal tax on the profits you made from selling certain assets). When required by the IRS, the crypto exchange or broker you use, including Coinbase, has to report certain types of activity directly to the IRS using specific forms and provide you with a copy. As a taxpayer, you’ll also need to report any taxable activities on these forms to the IRS on your tax return.
Did you stake any crypto or earn crypto rewards this year using Coinbase? If you earned more than $600 in crypto, we’re required to report your transactions to the IRS as “miscellaneous income,” using Form 1099-MISC — and so are you. Even if you earned staking or rewards income below the $600 threshold, you’ll still have to report the amount on your tax return. At this time, Coinbase only reports Form 1099-MISC to the IRS, but since crypto tax rules are still kind of messy, you may find other IRS forms on other crypto exchanges. Learn how the IRS taxes crypto
While exchanges or brokers only need to report “miscellaneous income” to the IRS, your responsibility as a taxpayer doesn't end there. You’ll also need to report all of your capital gains and losses when you file your taxes.
The reports below aren’t official IRS forms — they’re generated by Coinbase and intended to help you get started with your own calculations.
As the name suggests, your gain/loss report is a roundup of every transaction you made on Coinbase that resulted in a capital gain or loss, like selling, spending, or converting crypto. Note: for the 2021 tax year, Coinbase won’t report your gains or losses to the IRS.
Here’s a quick rundown of what you’ll see:
For each transaction for which we have a record, Coinbase calculates your gain or loss by taking the proceeds you received, and subtracting the cost basis (i.e., the price at which you originally bought or received your crypto).
Your gains or losses can either be long term (if you held your crypto for more than a year before selling or disposing of it) or short term (if you held it for less than a year).
There are a few different ways to calculate your total gains or losses. To find your cost basis, Coinbase uses an accounting method called “highest in, first out” (or HIFO) — meaning your highest-cost assets are sold first — which may result in a lower tax bill. HIFO is just one way to calculate cost basis, but there are a few others. Whatever method you use can impact your return, so make sure to consult a tax professional before choosing a strategy.
Your gain/loss report will only include transactions you made using your Coinbase account. It won’t include activity from other platforms or Coinbase products, like Coinbase Wallet, Coinbase Pro, or Coinbase Prime.
If you sold crypto on Coinbase that was originally acquired outside of Coinbase (like if you traded crypto on a decentralized exchange) speak with your tax professional, or use a tool like CoinTracker, since Coinbase won't have information about your cost basis.
If you use Coinbase, you can sign in and download your gain/loss report using Coinbase Taxes for your records, or upload it right into TurboTax whenever you’re ready to file.
Raw transaction report
If you or your CPA are up for the challenge of manually calculating gains, you can use your raw transaction report to reconcile all of your gains and losses before filing your taxes. This report lists the cost basis of all of your transactions without their associated gains and losses.
A quick note on state taxes
Every state has different guidelines for filing. For the most up-to-date guidance, check the website of your state or local government.
More forms and resources from the IRS
If you do your own taxes, you’re probably used to packaging up your data into these templates from the IRS. But if you’re new to filing your taxes yourself, or just curious about these forms, here’s a quick overview.
Form 1040: Also known as the U.S. Individual Income Tax Return. This form is used to determine your total taxable income.
Form 8949: This worksheet is relevant to your capital gains or losses from selling, converting, or otherwise disposing of your crypto. Any gains or losses must be reported to the IRS, on IRS Form 8949. Schedule 1: Part of your tax return, this form is called Additional Income and Adjustments to Income. Use this form to report staking, mining or other income from your 1099-MISC.
1040 Schedule D: Commonly referred to simply as “Schedule D" — this form is the part of your tax return that summarizes your capital gains and losses.
FAQs on crypto transactions: The IRS also refers to crypto as “virtual currency.” Check their website for explanations and examples of common tax questions.