Coinbase has announced that it will scrap the previous tax form that has been used by the crypto exchange and replace it with a new one in the coming weeks. In its review of the previous form, the crypto exchange announced that the previous form made some of its users overpay when buying Bitcoin and their crypto taxes.
Even though Coinbase wants to introduce a new tax form, a tax expert has noted that the new one has as much problem as the previous one with its limited usage. Shehan Chandrasekera, the Head of Tax Strategy at CoinTracker, a crypto tax firm, was the first person to notice the update after going through the crypto exchange’s customer help page.
Coinbase says it will stop the use of the previous 1099-K tax form
According to the crypto expert, the crypto exchange’s old tax form focused mainly on total proceeds from trades made on the platform. In contrast, the new one focuses mainly on amounts earned from products that hold interest on the platform. A detailed review showed that the crypto exchange would therefore abolish the use of the 1099-K, which is mainly used to access only trades carried out by users of the platform. Coinbase gave users on its platform who traded in nothing less than $20,000 across this tax year the 1099-K tax form.
A look at the US tax law regarding crypto shows that crypto holders must only give an account of the gains made from trading digital assets and interests gotten from lending. However, crypto experts noted that the tax form that was being distributed by Coinbase could be termed ‘useless’ mainly because it didn’t include a cost basis, which would allow one to know the capital gains on the platform. Experts say that the US tax law regarding crypto focuses mainly on capital gains, which can be gotten from the subtraction of the amount that a digital asset was bought from the amount sold.
Analyst says the new crypto tax form does not report a customer’s cost basis
A review that was carried out and reported some few weeks back showed that Coinbase allowed its users to overpay taxes due to the method of taxing it employed. Notably, the report stated that the mistake was not on the part of the crypto exchange. It was at a loss on filing an ideal crypto tax among the users as the United States Internal Revenue Service only talked about estimations.
After reviewing its previous tax form, Coinbase has now decided to release a new tax form known as 1099-MISC, which will consider all the customers on the platform that has earned $600 or more from its Coinbase Earn or USDC rewards program.
It is also not clear if the new form will touch specific areas, such as the list of crypto trades carried out on the crypto exchange platform. In his final review, Chandrasekera noted that Coinbase uses this new tax form to increase the number of users on its platform that will be paying tax. However, the expert added that both the old form and the new tax form has failed to address the actual cost basis that should be recorded.