Do I need to report my 'Coinbase Rewards' crypto currency if it's under $600 and I have not realized it?

[kintlekofer]

I have received less than $50.00 from Coinbase Rewards. These are cryptos they 'gift' you for taking a test to learn about new cryptocurrency offerings. I understand that you need to fill out a 1099-MISC for being "gifted" crypto, but on the Coinbase website it sounds like it's not necessary if it's under $600.00. I'm trying to understand if I need to report my rewards, if I have not converted them to fiat or exchanged them.

[DianeW777]

It depends. Income must be reported starting at $1, if you have a taxable transaction. If you did not sell or exchange your Coinbase rewards yet then you don't have anything to report.

Once redeemed, sold or exchanged then you have a taxable event.  Anything received in exchange for your reward will become a taxable event.

Will I need to report earnings on my USDC Rewards?

US customers that are subject to US tax reporting are required to report their earnings from USDC Rewards. US customers that earn over $600 in USDC rewards will receive a 1099-MISC from Coinbase. You can learn more about the 1099-MISC on the official website of the IRS.  Each reward distributed at the end of the month will populate as a line item in your Transaction history report.

If you have complete control and the ability to transfer, sell, exchange or otherwise dispose of the Coinbase, then it becomes taxable on that day.

[Edited: 03/28/2021 | 12:12p PST] 

@kintlekofer

[imddot]

From the Coinbase website: "Even if you earned staking or rewards income below the $600 threshold, you’ll still have to report the amount on your tax return."

Like the original poster, I have about $50 in Coinbase Earn Rewards. How does one input it to TurboTax?

[HelenC12]

Recently, the IRS ruled that airdrops, along with promos and staking rewards, only become taxable once the taxpayer "acquires the ability to transfer, sell, exchange, or otherwise dispose of the cryptocurrency." Airdropped currency that's not yet usable or accessible would therefore not be taxable until the taxpayer can exercise control over it.

• To enter your $50 in Coinbase Earn Rewards, see How do I report a crypto airdrop?

[imddot]

Perfect, thank you.

[T4Tax]

I have questions regarding the posts about Coinbase Rewards.   I'm at the "other tax situations" screen in TurboTax and realized I hadn't done anything with out coinbase info.  We received $42 in Coinbase Rewards and made 4 Coinbase purchases during 2021.  We did not sell, transfer, exchange, or dispose of anything.   We did not receive a 1099-MISC.  For 2021, our Coinbase account shows zero realized gain ($0 converted crypto, $0 sold crypto, $0 spent crypto, $0 advance trading).  Our Coinbase account shows  Misc Income of $41.94 for the account type "rewards".   I saw in the post above that for the Coinbase Rewards, the advice was to use the link to "how do I report a crypto airdrop" to enter the rewards.  This directs you to go to the Less Common Income / Misc Income section to basically enter "Coinbase Rewards" and $42.  Is this correct in my situation?  And what about the TurboTax question in the Wages & Income section asking "Did you acquire, sell, exchange, or dispose of any virtual currency in  2021?"?   I do not have any income to report from selling, etc.  and I had read previously in other posts that if you only had purchases, you could answer "No" here, which is what I have already done.  I just want to make sure I handle this correctly.  Do I only report the Coinbase Rewards in Misc Income as stated in the posts above or do I have to go back and answer "Yes" to the "Did you acquire..." and work from there? 

[RaifH]

Yes, you should report the Coinbase rewards in the miscellaneous income of your tax return, even if it was not reported to you on a tax form. To do this in TurboTax:

1. With your return open, go to Federal > Income & Expenses
2. Open the Less Common Income section and start or revisit the last entry, Miscellaneous Income, 1099-A, 1099-C.
3. On the next screen, start/revisit the very last entry, Other Reportable Income, and answer Yes on the following screen.
4. On the next screen, enter a description (for example, "Coinbase Rewards Payments") and then enter the total USD amount at the time of the reward, not its current value.
5. You may repeat this for every currency for which you received interest or reward or combine them on a single line.
6. Select Continue when finished.

Your basis in these coins is the USD value that you are reporting as your earnings here. When you sell them later on, that basis will reduce the proceeds from the sale. 

As for the crypto question, the IRS states that if your only transactions involving virtual currency during 2021 were purchases of virtual currency with real currency, you are not required to answer “yes” to the Form 1040 question, and should, instead, check the “no” box. However, since you also got these rewards, I would err on the side of caution and answer Yes. There's no penalty or tax for answering yes, they are just collecting information as they do with reporting foreign currency or large cash transactions. You can revisit this question by going to the Federal > Wages & Income section and then selecting Wrap up income all the way at the bottom. It will ask you about disaster distributions and then about cryptocurrency. 

@T4Tax