Coinbase and Gemini, two cryptocurrency exchanges based in the U.S will now be filing a tax report to the Internal Revenue Service (IRS) when customers purchase cryptocurrencies. Kraken, on the other hand, said they do not notify the authorities. As such, users are entirely responsible for determining if taxes are applicable to their trades.
Coinbase and Gemini to Issue 1099-K Forms to Certain Customers
Based on reports, Coinbase and Gemini will now be issuing a 1099-K form to certain customers depending on their transactions. Specifically, any trade above $20,000 or over 200 transactions will be reported to the IRS. That being the case, the authorities will be aware of the customer’s cryptocurrency holdings and if taxes should be applied.
Further reports reveal that customers who had either sold or traded crypto in 2018 will be declared to the IRS. Conversion of virtual currencies to fiat due to losses before 2018’s end, might bring about a $3000 reduction in tax. Alternatively, those who held their digital assets throughout 2018 without making any trades or withdrawals will not receive the form.
Kraken Exchange Refutes Claim of Filling Tax Reports to the IRS
Crypto Tax Girl made a tweet on January 23 stating that Kraken will be among the exchanges reporting to the IRS. However, the exchange refuted the claim on Reddit. According to them, they do not send account statements to their customers. However, its customers can choose to export their trade history themselves in order to ascertain if tax returns should be filed.
The U.S. based exchange also said users are entirely responsible for reporting their taxes. In their own words,
we do not send out end of the year statements and we are not responsible for determining whether taxes apply to your trades or for collecting or reporting
Exchanges’ Report to IRS Takes Away Anonymity
One of the perks of trading virtual assets is being able to trade anonymously without alerting the Federal government. This anonymity may have encouraged their use for money laundering. Now, privacy will no longer be the case given that the IRS is involved. Therefore, each time these trades are made depending on the amount, they will be fully aware.
BTCNN on January 23 reported that John McAfee, the founder of McAfee Associates said he is running from the IRS for not paying taxes for the past 8 years. He also said that for the past two years, he has been advocating that cryptocurrencies will prevent the government from imposing taxes on people. Nevertheless, this may have gone sideways due to the latest development.