You should expect to receive the following IRS tax forms from cryptocurrency exchanges and similar platforms before January 31, 2021. The information reported on these forms summarize your 2020 activity and have a big impact on your cryptocurrency tax bill.
Form 1099-K (Payment Card and Third Party Network Transactions)
If you had more than 200 transactions and $20,000 in gross proceeds in 2020, you should receive a Form 1099-K from cryptocurrency exchanges (except the ones that have chosen not to issue this form). This form will report your activity by month. Note that the information reported in this form is not helpful when it comes to filing your taxes. This is because this form reports your cryptocurrency profits on a gross basis without taking cost basis into consideration.
For example, say you purchased 1 bitcoin (BTC) for $10,000 and sold it for $30,000 during 2020. Form 1099-K would report $30,000 as opposed to the actual taxable gain of $20,000 ($30,000 – $10,000). Therefore, make sure to consult with a tax professional or use your own records to calculate actual gains and losses.
Form 1099-B (Proceeds from Broker and Barter Exchange Transactions)
Some crypto exchanges will issue you a Form 1099-B. This form is more taxpayer-friendly than the Form 1099-K mentioned above. This form will list your purchase price, sales price and the resulting gain or loss from your crypto transactions.
The information on this form will be reported on Form 8949 and Schedule D of your tax return.
(You will also get this form if you trade stocks and securities during the year)
Form 1099-INT (Interest Income)
Form 1099-INT will show your annual income received from income streams similar to interest income. The amount reported here should be reported on Schedule B of your tax return. Interest income will be taxed as ordinary income subject to your income tax bracket.
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Transaction History Report
The majority of the crypto exchanges and platforms will not issue you a formal IRS tax form. However, they will have a transactions history report available for you to download. This report will show your annual activity which can be used to figure out your capital gains and losses using any crypto tax software of your preference.
These IRS forms should be available for you to download by January 31, 2021.
Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.