Cryptocurrency Tax Preparation Firm Calls Out Coinbase Regarding Questionable Airdrop Details
According to CCN, a crypto tax preparation firm sent it a “consumer warning” outlining two crypto tax elements that other exchanges such as Coinbase and Intuit have been doing wrong. The warning stated concerning Coinbase,
“The online tax guidance provided by Coinbase implies that airdrops are taxable as ordinary income—which is reported on Line 21 of Schedule 1 of Form 1040—rather than as capital gains that only become taxable when the positions are sold.”
CNN then reached out to Coinbase, which viewed the statement was a mischaracterization of their online tax guide. The term “airdrop” is used only once in the guide and actually refers to “payments received” in cryptocurrency, stating
“When you’re paid in crypto by an employer, your crypto is classified as compensation and will be taxed according to your income bracket.”
A Coinbase representative also shared with CCN that
“Coinbase does not give tax advice, and we do not provide a service to customers whereby we ‘determine how much they owe the IRS’. Comments in the Tax Guide are only intended to be an informational starting point. We encourage customers to seek the assistance of a tax professional.
We plainly and clearly state our position on the website. […] If you perform a service to earn crypto, the IRS has indicated that it will consider that service to be taxable at ordinary rates. […] Our website states that if you are ‘paid’ in crypto, including in the form of an airdrop, the payment is taxable. We do not state on the website that ‘all’ airdrops are taxable as ordinary income.”
Concerning TurboTax, the report took the position that Intuit’s product erroneously does not allow over 250 entries for crypto sales, even though the IRS issued clear guidance on the matter that indicates that every sale should be noted. In CCN’s article, it states that it reached out to Sean Ryan and Perry Wood of Node40, which provides crypto tax prep software for individuals and CPAs.
According to them, the report referenced an Intuit press release issued last year which stated that it would be supporting crypto. At this point, TurboTax supports only 250 entries, but Wood and Ryan were not certain if it was an issue or not.
The CryptoTaxPrep.com bulletin points to an IRS guidance that allegedly states, “Unlike other stocks, bonds, or other capital assets, which taxpayers receive a form 1099-B for, every cryptocurrency transaction MUST be reported individually due to no 1099-B being issued.” Ryan shared with CCN,
“Neither side is entirely wrong. […] If you’re getting paid in an airdrop, then yes, it’s income.
We don’t see this as Coinbase saying that if you receive an airdrop out of the blue that you’re liable for it. […] The important thing for anyone to understand is that there is no answer yet. It’s more of an opinion. The IRS hasn’t given clear guidance on airdrops yet. […] The IRS is saying that cryptocurrency is property, and as you move property, whether moving it, trading it, or receiving it, those are all events that have to be tracked. The gains and losses on these transactions are what they’re most interested in.”
And finally, related to the Intuit TurboTax product, Ryan identified the issue as the software working only with one exchange” and that perhaps the best course is action is for Bitcoin traders to talk to a tax preparer who specializes in crypto.