Why we're supplying 1099-B instead of 1099-K Tax Forms
If you’re a U.S. resident or citizen, you and we are required to report any taxable gains or losses on your cryptocurrency and commodity transactions.
As cryptocurrency is a relatively new asset class, the IRS has been trying to determine how it should tax the asset.
For the tax year 2018, the IRS provided guidance for companies to issue 1099-K returns to US customers. Unfortunately, the 1099-K requires us to report the gross transactions of a user (like gross sales for reporting sales tax). The 1099-K was not intended to be a calculation of gains. We understand this provided a ton of confusion, but it was required of us by the IRS. If you require assistance with your 2018 taxes to remedy this confusion, we have a discounted arrangement with TaxBit to assist users to resolve the gain/loss calculation and issues with the IRS. They are the tax specialists but if they need our assistance in the process we are happy to help.
In October 2019, the IRS issued guidance that defined crypto as ‘legal’ property for tax purposes. So for the 2019 and 2020 tax years, thankfully, we had the choice to issue US customers the 1099-B form, which is a much better and more standard approach to reporting tax gains and would reduce your taxes vs. the 1099-K approach.
Specifically, the 1099-B is designed for capital assets such as stocks, bonds, and commodities, which, like cryptocurrencies, have a cost basis. Only the profit/gain you make on cryptocurrency transactions should be taxable. This 1099-B form is the same form one would receive from a brokerage firm.
We are sorry the IRS sent us all down a confusing path in 2018 but we were happy to take the lead in the industry in 2019 and issue customers a form that properly represents their profits and gains.