IRS Can Access Coinbase User Trading Data, Court Rules (2024)

FAQs

IRS Can Access Coinbase User Trading Data, Court Rules? ›

A US Federal court has ruled the Internal Revenue Service (IRS) is within its right to access Coinbase user data, in a case which sought to block the tax agency on constitutional grounds.

How are my Coinbase transactions taxed? Cryptocurrency transactions on Coinbase are subject to taxation, just like other financial transactions. In certain situations, Coinbase does report to the IRS. However, this does not absolve individual taxpayers from their responsibility to report their own transactions.

Major exchanges that operate within the United States are required by law to collect this information due to Know Your Customer (KYC) regulations. The IRS can and has requested these records from exchanges. In the past, the IRS has issued John Doe Summons to exchanges like Coinbase and Kraken.

Some cryptocurrency exchanges do not report user transactions to the IRS, including: Decentralized crypto exchanges (DEXs) like Uniswap and SushiSwap. Some peer-to-peer (P2P) platforms. Exchanges based outside the US that do not have a reporting obligation under US tax law.

If you have digital asset transactions, you must report them whether or not they result in a taxable gain or loss. You should: Keep records. Calculate your capital gain or loss.

What if I get audited? The IRS has started auditing taxpayers specifically to evaluate their crypto trades. This is nothing to worry about and you are expected to disclose any addresses or wallets you own or control and any exchange accounts you have.

Coinbase does not give any government in any jurisdiction (including law enforcement, or other government agencies) direct access to customer information on our or any third-party's systems.

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.

Despite the pseudo-anonymity of cryptocurrency transactions, they are traceable. Transactions on public blockchains, such as Bitcoin and Ethereum, are visible to anyone, including the IRS, which can potentially match 'anonymous' transactions to identifiable individuals.

The Top Anonymous Bitcoin Wallets Ranked

Zengo Wallet – Secure and anonymous crypto wallet using MPC cryptography instead of seed phrases. Ellipal Wallet – High-security, air-gapped wallet supporting 10,000+ digital assets. Ledger Nano X – Hardware wallet with multi-currency support and extreme security measures.

How can I avoid IRS with crypto? ›

Yes, everyone must answer the digital asset question – even if the answer is no. The IRS makes clear that unlike in previous years, for tax year 2022, everyone who files Form 1040, Form 1040-SR, or Form 1040-NR must check one box, answering either "Yes" or "No" to the digital asset question.

US taxpayers who fail to report crypto on their taxes can face serious consequences, including fines and penalties as high as $100,000 and up to five years in prison.

In March 2014, the IRS issued Notice 2014-21 (the Notice), stating that cryptocurrency was to be treated as property, rather than currency for US federal income tax purposes.

As long as you hold digital assets you purchased with fiat currency without converting them into cash or other crypto, you are not required to report or pay taxes on any potential gains to the IRS.

When it comes to conducting audits, IRS agents have the authority to search for publicly available information on the internet, including data from social media platforms that are publicly accessible.

If you earn $600 or more in a year paid by an exchange, including Coinbase, the exchange is required to report these payments to the IRS as “other income” via IRS Form 1099-MISC (you'll also receive a copy for your tax return).

Crypto is generally not subject to immediate taxation, assuming you purchased the crypto as an investment and didn't acquire it as a form of income or by other means. This means that when you US taxpayers purchase crypto, there is no immediate reporting requirement until you sell.

Yes, the IRS requires that you report cryptocurrency rewards or earnings even if you don't receive a Form 1099-MISC or Form 1099-NEC. Companies are not required to send you a Form 1099-MISC or Form 1099-NEC unless the income is $600 or more.

Taxable just means “subject to tax.” Most crypto activities are taxable, but not all. Buying and holding crypto, or minting and holding an NFT aren't taxable events. However, selling and converting crypto are taxable. (See unrealized capital gains and losses below for another example.)