Coinbase 1099 tax reporting fraud - very unique situation


#1

Hey everyone,

I can what can be termed in a very unique tax situation.To help put things in perspective here is the entire story and feel free to guide me in any way possible if you have any such experience and knowledge about the issue.

  1. We did a small ico and the ethers accumulated were drained to our local wallet. This was when 1 Ether was $1400 in January 2018 and since like any law abiding citizen asked my cofounder to create a coinbase account to move the ico raised company ethers (worth around $600000 at that time) while providing the company bank account details to coinbase while opening the new account, i did not have any plans of selling the ethers until a couple of days later when ether started crashing and we panicked and i sold the ethers for a huge loss and the amount stood at $400000 and I then made a transaction again as we had some inquiry from the securities board and repurchased at a loss a lot lesser ethers than we previously had.

At this point we asked COINBASE to produce the statement so we may submit the details to the Securities board. We also sent them a scanned letter copy from securities to us asking for ether details via mail after which which they immediately went to a cover up mode and blocked all transactions and asked us to open a support ticket and we did so but even after a few months of calling multiple times they never did anything abt it and the reps only kept asking me to withdraw the ethers where the quantity and worth had gone down and my cofounder (also my wife) account was blocked and only one page was provided so the remaining ethers would be moved out of the coinbase account with no accesss to any of other coinbase features and luckily sensing friaud from coinbase I immediately took screenshots to prove it and submitted to securities board.
After letting the securities board know we provided them all details and decided to move on as by now we had conducted just a couple of transactions. We moved the ether back to our wallets and that’s it.

NOW AFTER A YEAR I GOT A 1099 form in the MAIL FOR MY WIFE - (COFOUNDER) FOR $600K in transactions under month February showing 23 transactions with no explanations at all.

I literally collapsed as this is the last thing I expected to happen and I didn’t want to stress my wife as she is currently pregnant and it was a bad year for us due to the crypto crash and the ethers which were once valued $582000 are now valued at less than $45000.We are currently in bankruptcy mode and this has left me shocked.

Our situation:

We are on the verge of bankruptcy with no money and we have our company bank accounts and our bank accounts to prove that there were no cash withdrawals made from coinbase to our company account as we were shut off. Neither can I go online into my wifes account to lodge a complaint as coinbase has provided no facility and has done a complete cover up. There is no option where I can call someone and raise a support ticket online (no option in her account and rep asked you to file all isssues online). I realy don’t know what to do at this point and the 1099 number of $600k does not make any sense as they at present are worth less than $50k,

One thing I have realized in the last year is the governments in a mess and are not ready to do what it takes to bring order here. As you the categorization of these tokens by IRS is as a property by FINRA as a currency by SEC as a securities and by CFTC as commodities. These people have literally destroyed me and my family and we are barely surviving.

Looking for a solution:

  1. Coinbase again is not responding.

  2. I am not sure where to go and what to do. I am really worried as I have read online coinbase has expert lawyers who can kill cases like ours just like that. I really don’t know what to do and this 1099 from coinbase will kill us.

  3. My bankruptcy filing need to begin as I have creditors knocking on my door.

Any guidance and help here would be very much appreciated


#2

File your tax return with the crypto and include your tax liability in the bankruptcy filing.


#3

but the entire thing is a fraud, wouldn’t filing the existing tax liability basically state that we are accepting that the 1099 provided by coinbase is valid and they did not cheat us here.

In addition in a bankruptcy filing I believe I still owe taxes to the govt and that will not be discharged isn’t that correct?


#4

Correction- you are saying the ICO is fraud? Well possibly- depending on a number of factors- but Coinbase still has to report. If you didn’t spend the ethers, there isn’t really a taxable event. You still need to show that on your return though.


It isn’t fraud- it is a timing difference.
The 1099s aren’t going to be correct because they don’t know what you did on other exchanges.

Simple way to handle this- report the tax return with the crypto. Include your tax liability with your bankruptcy. Tax liability can be included in bankruptcy.


#5

The ICO is not the fraud here and has nothing to do here as it was only the sorce we the founders used to enable contributions from contributors to our company.

The reason this is a fraud from coinbase is because lets say for example i moved 100 ethers to my cofounders accounts valued at $1000 the day it was moved and then sold it for a loss at $600 and repurchased ethers with my remaining $600 i end up owning much lesser ether (eg - 55 ethers in this case against the 100 ethers i previously had).Coinbase immediately asked me to withdraw these 55 ethers (at the loss value for eg that day at $550) and loss that occured (100ethers-55ethers=45 ethers loss)was never shown in the 1099 (i mean the $550 dollar (55 ether) should have been the amount shown in the 1099 showing losses.

In trying to hide the above and not allowing any access to communication with them is legitimately a fraud as they are misappropriating the amount (P & L statements required to be provided)


#6

My recommendation is to find a CPA or EA who can calculate this for you to get the correct number that should be reported on your return. Then make a plan of action on how to address your claims.


#7

Why would you run an ICO through coinbase!? It’s certainly against their ToS. Especially when it’s public knowledge they have issues with the IRS. The 1099 isn’t fraud, they’re required to issue the 1099-k based on the value at the time of the transaction. Did you do this whole thing without professional legal and taxation help?


#8

the ico wasnt done thru coinbase :)…the ico is not the issue here as it was done legally and in the right manner plus we got a greenlight from the securities board.

The issue as i mentioned above is with coinbase not providing the right amount on 1099 - the losses weren’t shown


#9

Any recommendations where i can get access to a good cpa in the pa/ny/ct/nj/md area?

Finding the difference (loss) is the challenge here


#10

The 1099K is never going to be correct.
I am located in MD and I have colleagues in NY


#11

1099-k doesn’t show losses, just gross transactions.


#12

Also as others noted the 1099 from Coinbase has to assume when they are moved off of coinbase they were sold as this is better for you and I the customer because it is easier to prove we have something than prove that we do not have something.

With all do respect you do not have a case against coinbase as there is no fraud here just another Crypto player entering a game they do not understand the rules too yet.


#13

thank you for your inputs.


#14

Thanks Nekko for your input.


#15

can you provide your company name and address/ph number so i may reach out to you or your team.


#16

really fascinating situation… so glad this community is here to provide help.


#17

Just being realistic here. So many are saying the same thing that you did above and are automatically blaming coinbase or other entities when it is actually on them to know the rules of the game. I also found it hard to empathize as you stated you did an ICO which went belly up and most ICO’s are money grabs with no legit use case or need for an ICO.

So yes this is going to be a hard lesson learned but if you get through it you will be stronger. Next time I suggest you take some profits and pay off those debts so that the tax payers do not have to cover your bankruptcy.


#18

What this further emphasizes is the clear lack of education in the crypto space… I’m glad you’re here @jiyang10 . This is the place to learn.

We’re doing our part!


#19

hello I’m new, I received my 1099 form from Coinbase, showing I made Gross amount of payment card/third $50,015.15 and I don’t even own half of BTC, my estimate total asset probably close to 4000$
can someone help me how they came

up with this numbers
thank you


#20

The 1099 may not be accurate. Did you calculate your trades on crypto software to see what you would come up with?