If you have a Coinbase account and live in the United States, you probably have to report your transactions to the IRS. Therefore, it’s important for American Coinbase account owners to know which tax forms they may have to file and why.
If you have a Coinbase account, you may have to file various tax forms with the IRS. If you live overseas, you may have to report your Coinbase account holdings to the IRS using Form 8938. Form 8949 and Schedule D are used to determine and report tax liability for short-term and long-term capital gains from crypto sales through Coinbase accounts. Individuals who mine crypto for Coinbase may need to report their earnings on IRS Form 1099-NEC. Finally, Americans who receive a portion of their income through their Coinbase accounts may need to report such on IRS Form 1040.
Our tax CPAs are here to help you navigate the confusing tax filing requirements for Americans with Coinbase accounts. To learn more about our experienced tax accountants at US Tax Help, call today at (541) 362-9127.
US Tax Filing Requirements for Coinbase Accounts Owners
Having a Coinbase account to buy or sell cryptocurrency can be extremely lucrative for U.S. residents and expats alike. However, with purchasing and holding such assets comes tax filing requirements that many Americans may be unfamiliar with. If you have a Coinbase account, you may have to report your earnings and holdings to the IRS. In some instances, you may need to pay taxes, too.
IRS Form 8938
American expats with Coinbase accounts may need to report their holdings to the IRS if they live overseas. To do this, you’ll have to file IRS Form 8938 when you submit your taxes. Generally, American expats with foreign financial assets over a certain amount need to report such holdings to the IRS. This includes cryptocurrency held in a foreign Coinbase account, as it’s considered foreign property in the eyes of the IRS.
That being said, you won’t have to pay taxes for simply holding funds in a foreign Coinbase account. The rules for reporting foreign financial assets can be confusing, so ask a tax accountant for American expatriates if you have any questions.
IRS Form 8949
If you’ve earned funds from selling cryptocurrency in the past year, you may need to pay taxes on it. Americans with Coinbase accounts can use IRS Form 8949 to organize their trades and gains, which must also be documented on Schedule D of their annual tax returns. This can get overwhelming, so, to make things simpler, consider enlisting help from an experienced tax accountant.
Coinbase account owners can use IRS Form 8949 to figure out their short-term and long-term capital gains tax liability from cryptocurrency. If you held cryptocurrency in your Coinbase account for less than a year before you sold it, you will be responsible for paying short-term capital gains taxes. If you held cryptocurrency in your Coinbase account for longer than a year before you sold it, you will be responsible for paying long-term capital gains taxes. Generally, short-term capital gains taxes are costlier than long-term capital gains taxes.
IRS Form 1099-NEC
Mining cryptocurrency has become an increasingly popular way for Americans to make money. It’s a relatively challenging yet often lucrative practice with some complicated tax reporting requirements. If you’ve earned funds through mining cryptocurrency using your Coinbase account, you may have to report that to the IRS using Form 1099-NEC.
This can be confusing to new cryptocurrency miners who have never had to report this form of income to the IRS before. It’s important to understand that earning income from mining cryptocurrency is taxable in the United States, meaning you will likely have to report it using IRS Form 1099-NEC.
IRS Form 1040
Some employers in the United States pay their employees in cryptocurrency. While this is not necessarily a common practice, it does happen. If you receive a portion of your income from your profession through a Coinbase account, you’ll need to report that to the IRS using Form 1040.
Reporting cryptocurrency in this way can be difficult because you need to report its value in U.S. dollars. It certainly benefits American taxpayers to hire an experienced tax accountant when reporting income using IRS Form 1040, as it can get complicated quickly.
Why Do You Need to File US Taxes if You Have a Coinbase Account?
For first-time cryptocurrency buyers and long-time crypto-enthusiasts alike, the new filing requirements for reporting Coinbase accounts may be confusing. After all, the IRS has only recently begun introducing tax filing guidelines for cryptocurrency. To get a better understanding of these requirements, U.S. taxpayers should learn why they exist at all.
Cryptocurrency is a relatively new phenomenon. The IRS has taken time to decide how to treat this money-making venture, and it’s still ironing some things out. However, the IRS has generally chosen to treat cryptocurrency as property instead of cash. Of course, there are some exceptions to this, like when Americans get compensated for work by their employer through Coinbase accounts. However, generally speaking, cryptocurrency is considered property.
In the United States, you often have to pay taxes on transactions involving property and financial assets. If you have a Coinbase account and buy or sell crypto using it, it’s the same as buying or selling property. Any income you earn as a result of such transactions is considered taxable. It’s important to understand that the IRS is privy to many transactions you make using your Coinbase account. Coinbase sends such information to the tax collection agency annually.
As long as you live in the United States or retain your citizenship, you will likely need to file taxes if you have a Coinbase account. There’s really no getting around it. So, hire an experienced tax accountant, and file on time. If you don’t, you could face substantial financial penalties from the IRS.
Call Our Tax Accountants Today for Help Reporting Your Coinbase Account
If you need assistance filing U.S. taxes for your Coinbase account, our tax CPAs can help. To learn more about our experienced tax accountants at US Tax Help, call today at (541) 362-9127.
