Taxes on ETH staking rewards

[ekstremista]

Just wondering if anyone else has experienced this particularly nasty surprise from the IRS and Coinbase:

Long story short, Coinbase is reporting ALL staking income to the IRS, from way back when ETH staking went online in 2020. It's not just for 2023 or since April 2023, when you could first unlock and sell your ETH staking rewards.

Needless to say, that's going to be a hefty extra tax bill for those who staked since the start. Even worse, you get hit whether or not you sell your ETH rewards for US dollars. As I gather, Coinbase is basically using the ETH prices of April 2023 to decide the US dollar amount to report to the IRS (on form 1099-MISC).

This is the first time you need to pay tax in US dollars for staking rewards that were never sold and remain as ETH.

Can anyone confirm or disprove this? I hope I'm wrong, but somehow it doesn't seem so.

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[excelusps]

 It's essential to approach tax-related matters with caution and seek professional advice or consult official sources. Tax laws and reporting requirements can be complex and may vary depending on individual circumstances. However, I can provide some general insights on this topic:geometry dash

1. Coinbase Reporting Staking Income: Coinbase's decision to report all staking income, including unrealized gains, to the IRS is a significant development. This means that individuals who have participated in staking activities on the platform may have tax obligations based on the value of their staking rewards, even if they haven't sold the rewards for fiat currency.

2. Tax Implications of Staking Rewards: Traditionally, taxes are due when cryptocurrency assets are sold or disposed of, resulting in a capital gain or loss. However, the taxation of staking rewards, especially when they remain as digital assets and are not converted to fiat currency, presents a unique challenge.

3. ETH Staking and Reporting: The specific case of Ethereum (ETH) staking, as well as the method used by Coinbase to determine the US dollar value of staking rewards reported to the IRS, could have significant implications for affected individuals.

4. Seek Professional Advice: Given the complexity and potential impact of these developments, individuals affected by Coinbase's reporting of staking income should consider seeking advice from tax professionals or experts with knowledge of cryptocurrency taxation.

It's important to determine the accuracy and implications of such reporting through reliable sources or professional advice, given the potential impact on tax obligations for cryptocurrency staking participants.  

[SilverCryptoBullet]

Nevertheless, staking reward is like your income, and it is target of tax by IRS, you will only be taxed if you claim your staking rewards and already get your initial capital deposited for staking back.

Because if you only claim staking rewards but your deposit is still on an exchange, you can lose it. Like FTX exchange collapse, Terra collapse, you will not get your initial money back.

Rather than get income, you end with loss. If it is during a calendar year, your tax report will end with big loss, not positive income so I don't believe it will be taxed.

I am not a lawyer and it is my thinking only.

[avikz]

Coinbase is stock market listed company in US. So as per the local law, they are bound to report everything to IRS and other related departments. So they are doing what is expected.

Secondly, staking is your income. So you must have to pay your taxes as per the local law. That should be seen as a surprise at all. If you aren't sure about these things or not sure about the dollar value to consider, always take professional help. I am sure there are multiple tax law firms available in your country who knows how to deal with such things. Pay your taxes diligently because you wouldn't want regulatory hassles in your life.

[electronicash]

Coinbase is stock market listed company in US. So as per the local law, they are bound to report everything to IRS and other related departments. So they are doing what is expected.

Secondly, staking is your income. So you must have to pay your taxes as per the local law. That should be seen as a surprise at all. If you aren't sure about these things or not sure about the dollar value to consider, always take professional help. I am sure there are multiple tax law firms available in your country who knows how to deal with such things. Pay your taxes diligently because you wouldn't want regulatory hassles in your life.

coinbase IPO was 2021. the staking rewards back in 2020 shouldn't be taxed for this fact, correct?

if it's fair to say pay up your tax after all you are a citizen then they have to pay. most US citizens i think is on coinbase, it's a large sum to collect. Armstrong really did a big favor to the IRS for doing all this. he should win the highest medal for a civilian to have helped the country.

[jrrsparkles]

This is the first time you need to pay tax in US dollars for staking rewards that were never sold and remain as ETH.

Can anyone confirm or disprove this? I hope I'm wrong, but somehow it doesn't seem so.

This isn't the first time, staking or any form of profits will comes under capital gains taxes as per US laws so you have to pay taxes even before 2023 but this could be your first time that's why you are wondering why should you have to pay taxes even when you hold as cryptos not converted into fiat.

[Kelward]

Wow. Come on, people, spare me your ChatGPT responses.
 
I guess I was people for help, but then again, everyone is in him or her or their (or otherwise) for help.
 
Thanks for nothing.

You have to accept the obvious, if your government decides to tax you for income earned then you have little choice but pay it because they always win, if you don't, then you're breaking the law and you know the implications of that. So to be on the safe side of the law, give you government what belongs to it and have your peace, so better to remit tax on eth staking reward as demanded by them. Governments especially the US have been trying to regulate every crypto transactions, so it's no surprising that they'll unjustly go way back to demand taxations.

[ekstremista]

Wow. Come on, people, spare me your ChatGPT responses.
 
I guess I was people for help, but then again, everyone is in him or her or their (or otherwise) for help.
 
Thanks for nothing.

You have to accept the obvious, if your government decides to tax you for income earned then you have little choice but pay it because they always win, if you don't, then you're breaking the law and you know the implications of that. So to be on the safe side of the law, give you government what belongs to it and have your peace, so better to remit tax on eth staking reward as demanded by them. Governments especially the US have been trying to regulate every crypto transactions, so it's no surprising that they'll unjustly go way back to demand taxations.

Indeed, this seems to be the case. If Coinbase issues a 1099-MISC form "earned" money in US dollars, who am I to argue (or even if I have any means at all to do so)? That's despite the gains not being realized in any way, shape, or form.

Could you go absolutely broke this way? Say, ETH is pumped up one instant to $1B and you get your 0.1% staking reward to the tune of $10M USD. Lucky you!

Except ETH craps down back to its usual pricing of $3K or so. Nonetheless, you gained $10M in terms of IRS taxable income. Just for that one instant.

So you better have a real good checking account of $3M or so in order to give the government what it rightfully deserves from you. Right?

[sunsilk]

I have no idea how taxation goes there in the US but obviously, your country is one of the most strict in terms of implementing rules of it.

Coinbase is a registered company and that's why it has to send reports to the IRS and your government for most of the users. This is one of the reasons why KYC is implemented, not just to avoid money laundering but also for tax compliance.

You're free to withdraw your funds there for staking and it's not advisable to stake into centralized platforms if ever Coinbase has it. There are multicurrency wallets that where you can stake and it won't require you any kyc at least for now.

[God bless u]

I don't know much about whether it's true or not but I want it to be true. Every sector in the US has taxes on it and I don't get why people in crypto want tax free earning. The governments have the complete right to impose taxes on each and everything they want because of the facilities they are giving you.As a citizen you are compelled to pay taxes.

The other side of the coin is that governments should provide security and insurance that whenever there will be a scam or something like that we have your back and we'll try to track the criminals behind that. In the past days a couple of blockchains owners were sentenced for some time and that's a positive sign too.

[thecodebear]

Just wondering if anyone else has experienced this particularly nasty surprise from the IRS and Coinbase:

Long story short, Coinbase is reporting ALL staking income to the IRS, from way back when ETH staking went online in 2020. It's not just for 2023 or since April 2023, when you could first unlock and sell your ETH staking rewards.

Needless to say, that's going to be a hefty extra tax bill for those who staked since the start. Even worse, you get hit whether or not you sell your ETH rewards for US dollars. As I gather, Coinbase is basically using the ETH prices of April 2023 to decide the US dollar amount to report to the IRS (on form 1099-MISC).

This is the first time you need to pay tax in US dollars for staking rewards that were never sold and remain as ETH.

Can anyone confirm or disprove this? I hope I'm wrong, but somehow it doesn't seem so.

uhh you shouldn't be surprised at having to pay taxes on your staking rewards. Everyone knows you have to pay taxes on staking rewards. You owe taxes based on the price it was when you received it. Coinbase provides you with exactly how much you earn in both ETH and dollars every time they give you staking rewards. So all you have to do each year is get the report on Coinbase from the Account section or wherever, add up the dollar value for all your rewards for that year, and put that income on your taxes. It's real easy.

And yes you've had to do it since whenever ETH rewards became unlocked, I was thinking that was the merge back in 2022, but maybe it was the next update in April 2023 as you say. I paid taxes for 2022 based on the Sept 2022 price for all my previously earned staking rewards, plus the earnings the rest of the year after that, since that's when the ETH rewards were actually added to my account and Coinbase started stating how much I was earning in dollars, but I suppose maybe technically the April 2023 event was perhaps the actual taxable event if that's when unlocking was actually allowed.


I have no idea why you would think that you don't owe taxes on your previous staking rewards. IRS has long made clear that any staking rewards count as income for tax purposes and the taxable event is when you gain access to those rewards. So yeah, if April 2023 was when the stuff got unlocked, then that is the taxable event. So for 2023 taxes, your income as of April 2023 is ALL your staking rewards up to that point multiplied by the ETH price at that point, plus the dollar value of your staking rewards the rest of the year as you received them.

So no you aren't wrong. This is the case. I guess sucks that you didn't know this before but this tax policy has been publicly known for years. Shouldn't be a big deal, considering price in April 2023 was much lower than it is today and it's super easy to figure out your taxable income on Coinbase.

[kentrolla]

Sad to see such stuffs in crypto world world, i mean some of you might disagree with me but I think it's something which we already knew and we were aware that centralized Exchanges and it's staking systems will will soon have taxes on all the crypto related profits or earnings through centralized exchanges and it's schemes. We cannot do much  but rather stay away from such stuffs and try to be on DEC as much as possible but due to lack of features and UI in DEX we are using CEX. Even I need to figure out a way to avoid such things in the future.

[cryptoaddictchie]

Nevertheless, staking reward is like your income, and it is target of tax by IRS, you will only be taxed if you claim your staking rewards and already get your initial capital deposited for staking back.

Because if you only claim staking rewards but your deposit is still on an exchange, you can lose it. Like FTX exchange collapse, Terra collapse, you will not get your initial money back.

Rather than get income, you end with loss. If it is during a calendar year, your tax report will end with big loss, not positive income so I don't believe it will be taxed.

I am not a lawyer and it is my thinking only.

Maybe make sense Id hope this only applies to those who are sovereign by the US and not on Asian region. Its really hurt that government doing a lot of nasty stuff on crypto community. Does really staking reward needed a tax cause its an income from staking then thats mean they are considering it as investment? Well im not a lawyer as well and kinda have some buggy thoughts on this kind of matter but isnt it we are having a worse effect in the long run if this is the case?

[electronicash]

I don't know much about whether it's true or not but I want it to be true. Every sector in the US has taxes on it and I don't get why people in crypto want tax free earning. The governments have the complete right to impose taxes on each and everything they want because of the facilities they are giving you.As a citizen you are compelled to pay taxes.

The other side of the coin is that governments should provide security and insurance that whenever there will be a scam or something like that we have your back and we'll try to track the criminals behind that. In the past days a couple of blockchains owners were sentenced for some time and that's a positive sign too.

that's also very true. its always an obligation to pay tax when you are a citizen of a country. we all have been paying our government but if i have to, i will really be happy to send money more than what is needed especially if we can see they build bridges and roads and infrastructures that will make the citizens comfortable. 

i'm not from US though. but here's what i heard from those guys who were paying diligently, the tax money should be going back to the community and not to the people crossing borders.

[batang_bitcoin]

Sad to see such stuffs in crypto world world, i mean some of you might disagree with me but I think it's something which we already knew and we were aware that centralized Exchanges and it's staking systems will will soon have taxes on all the crypto related profits or earnings through centralized exchanges and it's schemes. We cannot do much  but rather stay away from such stuffs and try to be on DEC as much as possible but due to lack of features and UI in DEX we are using CEX. Even I need to figure out a way to avoid such things in the future.

They will happen for sure and we have to embrace that. As the crypto adoption increases, financial institutions are all in then it's no close book that everyone who have been staking or holding and then able to profit after selling will have to pay their obligations with the government through taxes. Well, every move we do then we have to take actions and part of it. Soon, we'll just talk about how people have been happy before on the early days of crypto when no government intervention, no bans, no taxes, no financial institutions are intervening but it can't be stopped.

[ekstremista]

So no you aren't wrong. This is the case. I guess sucks that you didn't know this before but this tax policy has been publicly known for years. Shouldn't be a big deal, considering price in April 2023 was much lower than it is today and it's super easy to figure out your taxable income on Coinbase.

Just to be clear, I'm "happy" to pay my fair shares of taxes, provided the rules are clear and sensible. The problem is that while staking rewards were being earned, the IRS issued no guidance on how to treat them for tax purposes. When the guidance finally came, it was too late to do anything, such as selling the rewards for USD in order to pay the taxes in USD. You had to sell at whatever market prices came much later, unless you drew upon your own cash from other sources.

If you paid staking taxes in 2022, good luck straightening things out with the IRS. For 2023, Coinbase issued a 1099-MISC form with staking income that's reported to the IRS and that you need to use to pay those taxes from 2022 and before. The IRS will go by that form, not by your calculations (which had to be pretty much guesswork, given the lack of IRS guidance at the time).

[gunhell16]

Just wondering if anyone else has experienced this particularly nasty surprise from the IRS and Coinbase:

Long story short, Coinbase is reporting ALL staking income to the IRS, from way back when ETH staking went online in 2020. It's not just for 2023 or since April 2023, when you could first unlock and sell your ETH staking rewards.

Needless to say, that's going to be a hefty extra tax bill for those who staked since the start. Even worse, you get hit whether or not you sell your ETH rewards for US dollars. As I gather, Coinbase is basically using the ETH prices of April 2023 to decide the US dollar amount to report to the IRS (on form 1099-MISC).

This is the first time you need to pay tax in US dollars for staking rewards that were never sold and remain as ETH.

Can anyone confirm or disprove this? I hope I'm wrong, but somehow it doesn't seem so.

My understanding is that the amount you put into staking ETH on Coinbase is tax-free. The tax that will be collected will come from the rewards that will be obtained from the amount
you put in the stakes. Please correct me if I misunderstood. This is the taxable income from the IRS, right?

And my understanding is that Coinbase does not directly deduct the tax from our staking earnings; instead, we ourselves will report it in the tax return that is called.

Reference :

https://www.coinbase.com/learn/your-crypto/understanding-crypto-income
https://gordonlaw.com/cryptocurrency-tax-lawyer/
 


 
 

[Abiky]

Coinbase is stock market listed company in US. So as per the local law, they are bound to report everything to IRS and other related departments. So they are doing what is expected.

Secondly, staking is your income. So you must have to pay your taxes as per the local law. That should be seen as a surprise at all. If you aren't sure about these things or not sure about the dollar value to consider, always take professional help. I am sure there are multiple tax law firms available in your country who knows how to deal with such things. Pay your taxes diligently because you wouldn't want regulatory hassles in your life.

I don't get why the US wants to tax staking income if no Fiat (USD) transactions are involved? You only pay taxes if you sell your ETH to USD. Not if you earn and "hodl" ETH without selling. At least, that's how I understood it from the very beginning. If things have changed, then it means the US government is treating ETH as a security instead of a commodity.

Nonetheless, staking on centralized exchanges brings too many issues I'd like to avoid in the first place. Non-custodial staking is the way. Maybe the US will start hunting down ETH addresses using on-chain analytics tools (Chainalysis) to detect "tax evaders"? With how strict crypto regulations are becoming, we should expect the worse.

[ekstremista]

I don't get why the US wants to tax staking income if no Fiat (USD) transactions are involved? You only pay taxes if you sell your ETH to USD. Not if you earn and "hodl" ETH without selling. At least, that's how I understood it from the very beginning.

That was one perfectly fine possibility (the one that arguably made more sense). Unfortunately, the IRS finally released the rules it decided to make up. According to these, you must pay tax at the "fair market value" of the rewards at the time you gain control of them (i.e., are able to sell).

In retrospect, this makes sense in terms for slowing down crypto adoption: If you stake, you're forced to go into cash at some point. No longer can you transact purely in crypto. In terms of maximizing the IRS's gains, it makes less sense, at least if you expect crypto to behave the same ways as since the beginning in 2009.

[Yogee]

[...]
This is the first time you need to pay tax in US dollars for staking rewards that were never sold and remain as ETH.

I will have to read more on this but I what I understand now is that staking is basically interest you earn from keeping your dollars in a bank so it is also income that should be subject to tax. The only question now is when it should be taxed? At the time you earned it in ETH or when it was converted to USD?

edit - Okay so it should reported as part of your taxable income at the time you earned the reward and not at the time you sold it. The IRS also clarifies that the valuation of the staking rewards is at the time of earning it.

This is different to the tax treatment of trading cryptocurrencies which is classified as capital assets and subject to capital gains tax.