Coinbase makes a big blunder – Several American Coinbase users have received a letter from the IRS (the US tax authorities) claiming several thousand dollars on cryptomoney winnings. Small snag! The users never realised the winnings in question.
127,000 dollars in taxes and penalties for winnings… non-existent
The information was relayed by Cryptotrader.tax, a service specialising in the calculation of the taxation of cryptoskills in the United States.
For example, John Smith (alias to protect the anonymity of the user) received a letter from the Internal Revenue Service (IRS), notifying him that he had underreported his income in 2018 „due to the failure to include his investment activity in cryptosurveillance“. In total, he would be required to pay some $120,960 in taxes and penalties.
However, it would appear that this claim is completely unfounded. As Cryptotrader like Bitcoin Pro points out, it was in fact the IRS that owed Smith money, as he had suffered $2,000 in losses on his cryptosurveillance business that year.
John Smith’s case is not an isolated one, because in the space of two days, Cryptotrader was contacted by dozens of Internet users who had received similar letters.
Whose fault was it?
Still according to Cryptotarder, it would seem that trading platforms such as Coinbase are at the origin of this quid pro quo of several hundred thousand dollars.
In fact, these exchange platforms would communicate information about their users via the 1099-K form instead of using the 1099 or 1099-B, which would be appropriate for their activity.
„The 1099-K was never intended as a tax form for cryptographic exchanges. It was designed to report income from platforms where you are paid directly by third party merchants such as Uber, Lyft and Etsy. The form does not make sense in the context of the exchange of cryptography. And yet, many major exchanges, such as Coinbase, have decided to use the 1099 form to declare customer income information. »
Publication of Cryptotrader
Despite the incongruity of the case, it is still possible to resolve the dispute by forwarding information of their gains and losses to the IRS. So more fear than harm!