Just got a notice from the IRS, I owe them $1.9 million dollars, lol. Coinbase assholes sent them a 1099-k saying I had 3.7 million in payment transactions. I wish it was 10% of that, talked to my accountant and we will send them docs to correct.
my coinbase 1099s have been some crazy numbers but thats not what the irs taxes you by, it just how much money has gone in and out of coinbase. that number is not the taxable amount its the total amount thats passed through. some is taxable (if you made a profit), some not (ie you lost money and also they dont tax money you sent there, even though those figures are included in the 1099). the irs gets a copy of that and i give a copy to my accountant also to send in with the rest of the paperwork.
to get the actual taxes owed i just import my coinbase (and other exchange) transactions into a crypto tax program and sent it all off to my accountant. so far not a peep from the irs.
I don't use Coinbase. However it doesn't make sense why they report to the IRS the amount of deposits/withdraws when they should just report the amount of PnL by the trades that took place.
If someone buys 1 BTC at $17.9K on one exchange, sends it to coinbase, then it will appear as if they received $17.9K with a cost basis of $0? If they also withdraw this amount weekly and send it back because they want to keep some on cold storage, won't each deposit also add up the balances? Hence I dont understand why they use this method.
Crypto taxes are a pain, especially if you are trading BTC pairs like ETHBTC because there is an extra step in calculations that need to be taken.