Coinbase Criticizes U.S. IRS Digital Asset Tax Reporting Rules as Overly Complex

ChainCatcher reports that Coinbase has stated that the IRS’s new digital asset tax reporting form, 1099-DA, is overly burdensome and could impose unnecessary administrative pressure on a large number of cryptocurrency holders. Lawrence Zlatkin, Coinbase’s Vice President of Tax, noted that the new rules require reporting of minor transactions such as stablecoin trades and network gas fees, despite the fact that stablecoins maintain nearly stable prices and gas fees are typically just a few dollars or less. Reporting such data could lead to “overreporting,” unnecessarily complicating the tax system. Currently, Coinbase is distributing 1099-DA forms to millions of U.S. users—a requirement for exchanges to report users’ digital asset transactions to the IRS and provide users with copies for their own tax filings. However, for this year’s filing, Coinbase will only report gross proceeds from digital asset sales to the IRS, not the cost basis; users must calculate their actual taxable gains themselves, which may cause confusion for some investors. Coinbase plans to begin calculating cost basis for users starting next tax year to simplify the filing process.