It appears to me that, this is negligence on the part of Coinbase and it is horrible that you will be paying such a huge tax that you incurred but not aware of in the first place. IF I'm in their shoes I will definitely be in a state of shock or became hysterical once I receive the notice asking me to pay $127k.
On the positive side to those who haven't received this notice like me, that we should start we could come up to a conclusion if Coinbase is still worth trusting since they have caused us a lot of trouble with the IRS but IMO, I should start avoiding Coinbase in any of my crypto activities.
You don't have to pay anything because of the form. You just have to let the IRS know what your actual gains / losses were.
In theory if you have been making a profit you should have been reporting anyway. And if you took a loss it's silly not to write it off.
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the 1099-K, in some ways, is good for us. if you can manage to stay below $20k or 200 transactions in gross activity, exchanges do no tax reporting at all. if they issued a more "appropriate" 1099, like the 1099-B that broker dealers normally issue, the IRS would be receiving a 1099 for you every time you sold a few bucks worth of bitcoin.
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Is it OR or is it AND?
I have always been under the impression that you had to go over both. You can have 500 transactions for $3.99 each and although you
should many places will not report. 500 transactions for $4.01 each and you get a 1099-K
-Dave
