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What I'm about to share is important to users of bitcoin mining pools who use CoinBase for their wallet and/or to convert bitcoin into USD.  If you have more than 200 transactions [Easily done with a payout for every block in a matter of several months] -AND- more than $20,000 in transactions.

I received the following email from coinbase today after they asked if I use my coinbase account primarily for business or personal use.  I told them business because my business checking account is linked to Coinbase.  I write off expenses related to bitcoin mining.  All payroll [since I began mining on September 22, 2014] still comes from my telephony training at the moment.  All profits [After expenses] from bitcoin mining are put back into buying more rigs.  

So, no payroll from profits made from bitcoin mining at the moment while I use those profits to grow my business [of mining].  I know of many entrepreneurs who did not take a pay check for a couple of years while starting a business to keep it alive before they could finally draw a paycheck for themselves.  Remind you, my only payroll in 2015 came from training telephone technicians.

Here is a copy and paste of the email:  [Nothing on the email said I could not share this anywhere else].

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Coinbase has requested a file from you.

Thank you for using Coinbase for your business activity. Due to your processing volume, your Coinbase transaction activity last year met U.S. tax reporting thresholds. As a result, we kindly ask you to please do the following:

1. Complete the fillable Form W-9 found here: https://www.irs.gov/pub/irs-pdf/fw9.pdf. Please fill out the basic information in boxes 1 through 6 and enter the applicable Taxpayer Identification Number in Part 1. Note: you may enter tax exemption codes, if any apply to your business, in Box 4. (If you believe the Form W-9 does not apply to you, please email us at taxfiles@coinbase.com and we will help you find the proper form.)

2. Sign and date the form on the line in Part II.

3. Upload the completed and signed Form W-9 using the Kiteworks website.

Coinbase will retain your completed form for tax reporting purposes and we will send you a Form 1099k in the next few weeks for your own records. If you have any questions please do not hesitate to reach out to taxfiles@coinbase.com. Please return the completed Form W-9 to us by January 25 so we can meet federal tax filing deadlines.

Upload link expires: Jan 25, 2016
This upload requires authentication.
To upload your file, please activate your account by creating a password.

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If you read the instructions for US Form 1099-K you will see the following in the instructions:  https://www.irs.gov/instructions/i1099k/ar02.html#d0e387 (https://www.irs.gov/instructions/i1099k/ar02.html#d0e387)

Exception for de minimis payments.   A TPSO is required to report any information concerning third party network transactions of any participating payee only if for the calendar year:
The gross amount of total reportable payment transactions exceeds $20,000, AND The total number of such transactions exceeds 200.

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Box 4. Federal Income Tax Withheld

Enter backup withholding. Persons who have not furnished their taxpayer identification number to you in the manner required are subject to backup withholding on payments required to be aggregately reported in box 1a.

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My question is this:  How does Coinbase KNOW what transactions are payments and what transactions are simply transfers from their wallet to a hardware wallet for cold storage?  What if I then [Later] transfer all or part of funds from cold storage back to my Coinbase wallet and use it later on to purchase rigs or other hardware?  Will the transfer from cold storage wallet to coinbase be counted as a "transaction" or thought to be a "payment" to me by Coinbase?  How the hell do they KNOW what is a payment and what is not?

Another example:  If I transferred $70,000 USD to my Coinbase account THEN purchased $70,000 worth of rigs, then transferred $70,000 to my cold storage wallet, then later transferred back to my coinbase wallet, then later bought $70,000 worth of rigs, is this to be reported as $280,000 worth of transactions on form 1099-K?

Another example:  I paid for something with bitcoin via escrow.  Let's say it did not work out and I get refunded that same amount.  Is the refunded amount to be added to the form 1099-K as well?

How do they know what is payments and what is not?  How do they know what is simply a transfer to what would be considered a savings account (cold storage) and then transferred back to what would be considered a checking account (everyday wallet)?

This will be interesting when I get the form 1099-K to see the gross dollar amount they put on the form.

We will see what is put on the 1099-K and if discrepancies have to be fixed, how well will Coinbase communicate with me to fix those discrepancies?  Will they ignore me or assist me?

The purpose of this post is to help others to avoid going through what I'm going through.  Especially, if this ends up being a long grueling process of editing one discrepancy after another regarding form 1099-K.  I hope others will be able to learn from this experience I'm about to go through and how to avoid a lot of headache on our end and on Coinbase's end.  I'm sure they will not enjoy fixing discrepancies either.

I now have to make sure I'm DEFINITELY organized.  I can see a visit from the tax man very easily this year if my Form 1099-K is not accurate and Coinbase does nothing with me to fix discrepancies.  

If Coinbase is helpful with me in fixing any possible discrepancies, I will change the title of this thread to reflect it and I will post in detail how they assisted me.

If Coinbase is not helpful with me to fix any possible discrepancies and makes this a long, grueling and stressful process , I will be on a mission to put an end to anyone doing business with Coinbase.

Hopefully, [as a miner who works to process transactions and strengthen the bitcoin mining network] I'm not spat upon and ignored by those who benefit from my work of securing the network and keeping it decentralized and thereby assisting them in continuing their prophets from the exchange and bitcoin mining network.

Totally agree...

I can understand them having to report transactions "according to government regulations" since they do business like a bank and with banks that are also under the same regulations.  It's a way for the government to police [via the tax man] those who might commit fraud or evade taxes.

I do everything by the book.  I mark off all things that are allowed to be written off for tax purposes.  I invest what remains after expenses back into more mining rigs.  The ONLY payroll I have had is from the training part of my business when training telephone technicians.  There has been no payroll from bitcoin mining because I use ALL of it's profits to invest into more rigs or related hardware to grow my hash.

My only concern at this point in time is WHAT EXACTLY is Coinbase going to report on their 1099-K as transactions?  I more than likely will have to have several communications back and forth with them to PROVE that some transactions were simply transfers from cold storage address to coinbase or visa versa or from coinbase to another exchange after coinbase exchange went down to have the opportunity to sell my coin at another exchange in the event of a flash crash.  That occurred here recently when Coinbase Exchange went down.  This is what concerns me.

We will see how cooperative Coinbase is with me in future correspondence to clear up any discrepancies they may have on form 1099-K.

wtffffffffffffff get out of our livessss coin baseeeeeeeeeeeeeeeeeeeeeeeeeee uurrhghhhhhhhh!

Really glad I saw this post as I'm starting to get close to that 200 transaction limit already for this year.  Is the 200 for all transactions or only incoming and trading ones? 

I can understand Coinbase having to follow banking regulations made by the U.S. government if they are to do business with banks inside the U.S.  I have no issue with that.  The main purpose of this thread is to create a history of what I'm about to go through for others to learn from.

It may turn out that all will be fine and nothing to worry about.

My main concern is how in the world Coinbase will KNOW what transactions were payments and which one's were not?  I may end up having to go back and forth with them PROVING my wallets which funds were transferred to were for cold storage and I alone own and have access to them.  Because I would move funds in and out of the cold storage wallets all the time.

There were times I transferred to another exchange when Coinbase Exchange was down so I can be prepared to dump my coin in the event of a flash crash.  When the cause for concern for a flash crash was over and I transfer THE EXACT SAME AMOUNT back to my coinbase wallet, is that considered another transaction to report on form 1099K and looked at as a payment I received from someone else or what?

It is many things like this we are about to find out over the next several weeks as I straighten this out.

David

That I'm not sure of.  That's what I'm about to find out when I get form 1099-K sent to me.

Yes, I can see this for day trading.

My only concern for me as a miner and NOT day trading is what transactions they may THINK are payments to me or income that are in fact NOT income or payments to me.  They were simply nothing more than a transfer from like a checking account to a savings account and then back from a savings account (cold storage) to checking account.  I'm curious if they will have those included on the form 1099-K.

Agreed, form 1099 is for payments + the following:  

Box 1a. Gross Payment Card/Third Party Network Transactions

Enter in box 1a the gross amount of the total reportable payment card/third party network transactions for the calendar year. Gross amount means the total dollar amount of total reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts. The dollar amount of each transaction is determined on the date of the transaction.

I can understand them having to report transactions "according to government regulations" since they do business like a bank and with banks that are also under the same regulations.  It's a way for the government to police [via the tax man] those who might commit fraud or evade taxes.

I do everything by the book.  I mark off all things that are allowed to be written off for tax purposes.  I invest what remains after expenses back into more mining rigs.  The ONLY payroll I have had is from the training part of my business when training telephone technicians.  There has been no payroll from bitcoin mining because I use ALL of it's profits to invest into more rigs or related hardware to grow my hash.

My only concern at this point in time is WHAT EXACTLY is Coinbase going to report on their 1099-K as transactions?  I more than likely will have to have several communications back and forth with them to PROVE that some transactions were simply transfers from cold storage address to coinbase or visa versa or from coinbase to another exchange after coinbase exchange went down to have the opportunity to sell my coin at another exchange in the event of a flash crash.  That occurred here recently when Coinbase Exchange went down.  This is what concerns me.

We will see how cooperative Coinbase is with me in future correspondence to clear up any discrepancies they may have on form 1099-K.

You are not welcome here.

If you continue, you will receive a ban from a global moderator.  Not just your user name, but your IP address will be banned.

As I've said before, it will occur.  Your evidence is only mounting up.

I say again, please stop posting here.  As your posts here [Or anywhere else for that matter] do not contribute anything positive to the forum or the bitcoin community.  If you cannot talk or debate respectfully, you are not welcome him, Sir.

I believe they are doing what they have to do in order to do business with banks.  Banks have to abide by these regulations and any other institution that acts like a bank and does business with banks on a large scale has to abide by the same regulations.  I simply ran into a regulation I was ignorant of with 200+ transactions totaling more than $20K must be reported with Form 1099-K.  If I had known this, I could have saved Coinbase and myself unnecessary paperwork.

My only concern is what transactions will be included in their total on Form 1099-K.  I'm concerned simple transfers back and forth from my everyday wallet to cold storage should not be added into the total on Form 1099-K.  I will find out soon enough I suppose...

I spoke to the IRS earlier today.  They told me to provide my evidence to Coinbase via email and via USPS certified mail; to ask Coinbase to send a "corrected" form 1099-K and to keep copies of all correspondence with Coinbase.

So, we are about to see if Coinbase will cooperate with me and "correct" the form 1099K.  I purchased $35,000 worth of bitcoin via my Coinbase Wallet and USD transfers straight into Coinbase exchange during the month of December.  When I transferred $30,000 of that $35,000 back into my Coinbase wallet from the Coinbase Exchange, they reported it as a damn payment on the form 1099-K for the month of December.  THAT IS JUST FLAT OUT WRONG!  

They have me down as receiving over $87,000 in payments during 2015 when it should only be approximately $35,000 in payments.  They had also messed me up for the months of June, July, November and December.

I had purchased $16,000 worth of bitcoin via coinbase wallet through my bank in July and transferred it to the exchange.  I later transferred it out of the exchange back into my coinbase wallet then into another wallet for cold storage then back into coinbase wallet to withdraw and deposit back into my bank.  They counted all of those as damn payments.  Pisses me off.

We will see if they will be cooperative and "correct" this for me.  It may be a simple mistake.  It stresses me out to say the least.

Everyone will know soon enough if Coinbase wants the IRS to audit people [To no travail] or if they are willing to assist their customers with their mistakes made on important tax forms by correcting them.

I know one thing, if they are not cooperative, it shows they have no desire to have a good reputation with businesses like my own who wants to grow and do even more business with them.  If they do cooperate, I will be more than happy to take the time to explain how helpful they were in clearing up the misunderstanding.

I should be fine as long as you have to have both the $20,000 as well as the transactions.  I'm sure I did reach the transactions.  Just not the money.

Good, I'm happy to hear that.

I've learned a lesson in all of this:

Coinbase has no clue [If you use other wallets, such as Trezor, Blockchain.info, etc...] to store bitcoin for safe keeping.  When we send funds into those wallets from our Coinbase wallet for cold storage and later transfer them back to our Coinbase wallet to cash out to our Checking account, they will assume those are payments even though they are not.  So, it's best to keep your transactions with Coinbase each year below 200 transactions to avoid having to ask them for a "corrected" Form 1099-K.  You don't get a form 1099-K unless you reach 200+ transactions coming into Coinbase AND those 200+ transactions add up to more than $20,000.00.

Coinbase, is doing all businesses a good service by enabling us to convert bitcoin to FIAT and deposit it into our checking accounts.  I appreciate them doing this for the bitcoin community.  I only hope they are cooperative in working through misunderstandings about transactions.  It's impossible for Coinbase to know if bitcoin transferred into your Coinbase wallet was transferred from another wallet under our own control or from someone else in the form of a payment.  This why it is best to avoid putting Coinbase in the position to TRY to determine what transactions were actual payments and which were simple transfers from a wallet under our own control back into our Coinbase Wallet to cash out into FIAT.

Old thread, but have there been any updates on this? Did Coinbase work with you in the end?


Do you get a Form 1099-K if you make 200+ transactions within Coinbase, including trading on Coinbase Pro? Doing day trading can easily add up transactions, but those won't be "into Coinbase". Also doing just 4 BTC day trades now will get you above $20k.

coinbase pro and coinbase prime customers receive a 1099-K if they pass the 200 transaction/$20k threshold. once you pass the threshold, they will place a restriction on your account and formally require you to complete a taxpayer ID request.

this is why i don't really trade on coinbase pro---i mainly only use them to cash out fiat money. staying under the 200 transaction threshold prevents any 1099 reporting. i do my day trading elsewhere, on exchanges that don't report to the IRS.

be mindful of this: a handful of states have much lower 1099 reporting thresholds, some as low as $600. (https://help.coinbase.com/en/pro/taxes-reports-and-financial-services/taxes/1099-k-tax-forms-faq-for-coinbase-pro-prime-merchant.html)

regular coinbase.com customers do not receive a 1099-K. they may receive a 1099-MISC if they receive $600 or more from "coinbase earn, staking rewards, and USDC rewards".

Thanks for sharing that.

Related interesting stuff: a crpyto audit letter from the IRS (https://cryptotapas.com/irs-crypto-tax-notice-probes-deep-key-takeaways-next-steps/) requesting a ridiculous number of things for 2017. Someone posted it on Reddit without any details (some claim the letter is fake). Would be interesting to know if the poster was caught by the 200tx/$20k threshold.

https://cryptotapas.com/wp-content/uploads/2020/02/Image-1-1.jpg