Can anyone help with a 1099-K Question?

[mdelgaizotaxes]

I have a customer who received a 1099-K that shows just about $8,000 passing through it in only January and February from Coinbase Inc. They only invested $3,050 total and it is currently only worth about $1,000. When I fill out the Skedule-K form it is treating it as an $8,000 gain. How do I report the proper loss in Pro Series Basic? Any help would be much appreciated.

[Just-Lisa-Now-]

A 1099-K is just showing electronic payments received, I don't think there's a form to fill out for it in the software, is there?    What Schedule K are you referring to?

[garman22]

There is a form in PS. I actually had to look it up. Does Coinbase use 1099-K's?

[mdelgaizotaxes]

Yes Coinbase issued a 1099-K which I believe is mostly for informational purposes only. The taxpayer purchased the Cryptocurrency for $3,050. I believe it went up and down throughout the year but he never received any payments. He still owns his shares and didn't sell any. It is currently only worth about $1,000 which would be a short term loss but he never sold any and therefor I can't take it as a loss. I wound up using the reconcile option on the 1099-K worksheet to zero it out but I'm not sure if that is the right way to handle it. He did not earn anything at all on his investment. It also looks like Coinbase has sent out many inaccurate 1099-K's after researching on the internet. Any other help would be still be much appreciated.

[garman22]

Wow......yeah, i think I would have done what you have. Lets see if anyone else chimes in.

[rbynaker · Accepted solution]

https://support.coinbase.com/customer/en/portal/articles/2721660-1099-k-tax-forms-faq-for-coinbase-p...

Make sure you get the entire account history.  For cryptocurrency every sell transaction is reportable on Schedule D/8949 and you'll have to track and report basis for each transaction.  If they're also "mining" coins that may be a Schedule C activity.

[abctax55]

I'm not familiar with Coinbase - but what you are describing is simply a Sch D transaction WHEN the investment is sold.

UNLESS - Coinbase is like Bitcoin?  

But even then, I don't think a F 1099-K should have been issued.  

[rbynaker]

Yeah, I'm with you.  I don't see what a 1099-K has to do with anything here.

[Just-Lisa-Now-]

I haven't seen any 1099Ks for crypto transactions either....I did have a guy that brought me the 8949 from CoinTracker, he hadn't actually "sold" anything or received any money, but when they trade these crypto currencies back and forth, aren't the considered a sale/purchase like any other stocks?

[mdelgaizotaxes]

I agree with both of you that the form should not have been issued, but it was. it was also reported to the IRS so I don't like the idea of just leaving it out, which is why I filled out the form and then used the reconciliation box to zero out the income.

[qbteachmt]

"it was also reported to the IRS"

As Informational. That is not anything to do with Taxes. It is part of the IRS watching for suspicious monetary movement. There is No Reconciliation of that form; that is not treated the same as a 1099-Misc or a 1099-B. If I sell a car through eBay, for $20,001, I might get a 1099-K = over the reporting threshold. It means Activity. Not tax related. There is a double-threshold for reporting or not, to your client:

A Form 1099-K includes the gross amount of all reportable payment transactions. ... Third party network transaction means any transaction that is settled through a third party payment network, but only after the total amount of such transactions exceeds $20,000 and the aggregate number of such transactions exceeds 200.

Your Client did financial transactions with a Third Party Payment Settlement Entity. That's all it means.

[rbynaker]

While I agree, 1099-K forms are fairly useless (other than as a breadcrumb to some transaction which may or may not belong on a tax return), the IRS does use this information in their automated under-reporting system.  I've seen several IRS letters based on 1099-K info.  So I certainly understand the desire to head them off at the pass.

[qbteachmt]

1099-K = Financial Activity as in the number of transactions or the amount met the reporting threshold. That doesn't have any info for why money moved or for the nature of the activity. It's Informational Reporting = "Hey, this name had this much activity." You don't do anything with a 1099-K.

[mdelgaizotaxes]

My understanding is that the IRS received this form so I don't feel comfortable omitting it completely from the return. It really should be linked to a schedule C for example if it was actual income received, which in this case it was not. Why do you think I can just ignore it?  
See....    https://www.irs.gov/businesses/understanding-your-1099-k    and Thanks!

[sjrcpa]

Mostly I see 1099-Ks for credit card sales. If the 1099-K had $8,000 and my client's Gross Sales were $150,000  I do nothing (i.e. ignore)  with the 1099-K because I know all credit card sales are in the $150K.

[rbynaker]

I've also seen them from airbnb (picked up a new client who didn't report anything on his DIY 1040, then got a nastigram from the IRS).:+1:

[genetank]

How did you resolve the this issue?

[traviswbraun]

I am also curious. I get everyone's point. In my case I want it to flow to Schedule D.

[Terry53029]

Crypto currency is treated as property by IRS, and is only reported when your client sells, just like stock. I have had a number of clients from coin base, (an online platform for buying, selling, transferring, and storing cryptocurrency.) but none ever received a 1099k. If your client is involved in mining, then that is a schedule C activity. I believe you need more info from your client