BAM Trading Services Inc. (“Binance.US”) provides required IRS forms and federal/state reporting for digital assets on our platform to users who have met the minimum threshold for tax purposes. Taxes on cryptocurrency transactions are a complex issue. Please note: Binance.US does not provide tax advice and we recommend contacting a tax professional for personalized assistance.
Binance.US takes the position that it is a Third Party Settlement Organization (“TPSO”) under Section 6050W of the Internal Revenue Code and, accordingly, must file IRS Forms 1099-K for certain transactions settled on the platform. We will continue to evaluate this assessment and update our customers if our interpretation of our reporting obligations or IRS guidance changes.*
The IRS classifies cryptocurrency as “property” for tax purposes. This means that each cryptocurrency trade or sale is a taxable event. Similar to stocks and equities, if a taxpayer traded or sold cryptocurrency, then the person should report their taxable transactions on IRS Form 8949.
The IRS released its 2020 IRS Form 1040, which requires every taxpayer to attest to the following: “At any time during 2020, did you receive, sell, send, platform, or otherwise acquire any financial interest in any virtual currency.” If “Yes”, then the IRS may verify that the taxpayer reported all taxable cryptocurrency transactions on IRS Form 8949. Binance.US is unable to provide tax advice, so we recommend that users consult a tax professional when considering their individual tax reporting obligations. There are many third-party services available that provide methods for users to generate and file the IRS Form 8949 by importing transaction data via the upcoming Statements & History function on Binance.US available starting March 19, 2021.
Binance.US will deliver Form 1099-K to Binance.US users who meet both of the following conditions:
- The Digital Asset-for-USD sales on the platform exceed 200 transactions during the calendar year, and
- Total sales proceeds from all Digital Asset-for-USD sales exceed $20,000 during the calendar year.
If your account has met both of the above thresholds, you will receive a Form 1099-K from Binance.US to the address of record for your account as of January 2021. An identical copy of your account’s Form 1099-K will be filed with the IRS. If you were expecting to receive a Form 1099-K and did not, it’s likely that you have only met one of the conditions above, not both.
Note: If you live in Arkansas, the District of Columbia, Illinois, Maryland, Massachusetts, Mississippi, Missouri, New Jersey, Virginia or Vermont (at the time of writing), you may be subject to different reporting thresholds.
Form 1099-K reports third party network payments received for the calendar year. Binance.US is required to report gross proceeds from all Digital Asset-for-USD sales executed on the Binance.US platform when applicable reporting thresholds are met. Form 1099-K is informational and does not show gains, losses, or cost basis.
Form 1099-K is not the same as Form 1099-B (which shows either gross proceeds or gains/losses from broker transactions). Binance.US takes the position that it is not required to issue Forms 1099-B because cryptocurrency transactions are regarded as sales of personal property under current IRS guidance.
You may read more at the IRS Instructions for Form 1099-K. We have found that the “Specific Instructions'' on Page 1 provides valuable context with respect to Binance.US’ Form 1099-K reporting obligations.
We also suggest that you consult with your tax advisor if you have questions about your individual tax obligations derived from your activity conducted on the Binance.US platform.
*Legal disclaimer: For certain transactions, Binance.US is a Third Party Settlement Organization under Section 6050W of the Internal Revenue Code and must file IRS Forms 1099-K for transactions settled on its platform, including transactions involving the sale of digital currencies for cash between users. We will file a Form 1099-K with the IRS, and in some cases certain state authorities, to report transactions by Binance.US customers in each year where we are required to do so under applicable regulations, including Section 6050W. We will send you a copy of the IRS Form 1099-K via USPS mail.
This material has been prepared for general informational purposes only and should not be considered an individualized recommendation or advice. Binance.US does not offer tax advice. Please consult an outside tax professional for guidance on your personal tax obligations.