U.S.-based cryptocurrency exchange Coinbase decided to withdraw its current tax form and replace it with a new one, due to a number of issues, causing some users to overpay their Bitcoin and crypto-related taxes. The new form, however, is far from perfect. Experts claim that due to inheriting some of the issues in the previous document, the new tax document is imperfect.
Initially, the tax document change was noted by Shehan Chandrasekera, Head of tax strategy at CoinTracker. He clarified that Coinbase made an update to a help page, announcing that Form 1099-K would be replaced with form 1099-MISC. The most notable change in the form is the transition from declaring total proceeds of trades executed to only declaring the money earned from Coinbase’s interest-bearing products.
However, according to U.S. tax laws, taxpayers need to report both the income from cryptocurrency trading, as well as interest received from lending protocols. The old form did not include a “cost basis” information, which determines the price at which users bought the crypto assets, making the form useless.
Coinbase’s new form targets all users subject to U.S. laws with earnings of $600 and more by using Coinbase Earn, USDC Rewards, and/or Staking in 2020. Previously, users had to declare trades if they exceed 200 trades in number and made trades of at least $20,000 during the tax year.
The exchange has to issue the tax form due to U.S. law requirements that oblige crypto exchanges to hand over to customers such relevant tax forms, and later return them to the Internal Revenue Service.
Meanwhile, Coinbase and regulations had yet another battle, this time – with a win for the Commodity Futures Trading Commission (CFTC). Coinbase Pro, aimed at professional traders, would no longer offer margin trading services starting 5 pm ET on November 25.
"Product will be taken offline in December once all existing margin positions have expired," the exchange noted.
Coinbase’s Chief Legal Officer Paul Grewal noted that the exchange is “looking forward to working closely with regulators to achieve this goal."