Coinbase has responded to the need for better tax regulation on cryptocurrencies, it has done so by introducing a new feature that would enable crypto owners to prepare a filing for the Internal Revenue Service (IRS).
The new tax center will notify users about their taxable activity, including their short and long-term gains. This feature should help when drafting an accurate filing for the IRS to assess.
The regulator announced last year it would seek to create a clear regulatory framework enabling watchdogs to start collecting tax on crypto. While some crypto owners have been doing so all along, others have not. The new tax center will make things much simpler as it would present a ready sheet with the required numbers needed to provide on the filing, which should be handed in by the April 18 deadline.
Coinbase commented, saying: “We're simplifying the process by showing each customer a personalized summary of their taxable activity on Coinbase, broken out over time by realized gains/losses and miscellaneous income.”
The company made sure to create a simple tool to quickly sort out taxes and file accordingly to the IRS. The government has been increasingly looking into crypto as a source of additional tax funds to underpin the growing burden on the public purse.
Meanwhile, the IRS has been investigating ‘crypto whales' who may have hidden or moved currencies in an attempt to conceal their association, thus avoid paying tax. For ordinary and retail investors, the IRS mostly uses the 1040 form to inquire if people owned crypto.
One shortcoming of the new tax center is the lack of the 1099 form. This form is used by banks to make clients aware of how much profit they have turned on dividends and investments.