Does Robinhood Report Crypto to IRS: Taxes Explained

Published: January 3, 2024 | Last Updated: January 3, 2024

Markos Koemtzopoulos

Markos Koemtzopoulos is the founder and main writer of ElementalCrypto. He has been a lecturer at the University of Nicosia on cryptocurrencies and DeFi and has taught two courses on crypto and blockchain technology.

When you trade crypto on Robinhood, Robinhood reports your crypto losses and profits to the IRS. At the beginning of year in February, Robinhood issues a 1099 report that shows the crypto gains and losses you made during the previous tax year. This report is shared with the IRS. The report is issued if you sold or received more than $600 worth of crypto. 

Robinhood’s Form 1099-B, along with other tax documents, assists users in accurately reporting their cryptocurrency transactions on their tax returns. However, It is the responsibility of individual users to ensure they accurately report their cryptocurrency earnings and comply with the IRS guidelines.

In addition to providing users with tax documents, Robinhood also offers resources and educational materials to help users understand their tax obligations related to cryptocurrency transactions. These resources include guides and FAQs that explain the tax implications of buying, selling, and holding cryptocurrencies.

Do I need to file a tax return or does Robinhood do it? 

You need to upload the 1099 report using your tax reporting software such as Turbotax. You also need to make sure you report your cost basis. Robinhood now has its own crypto wallet which means that you can buy crypto on another platform, transfer it to your Robinhood wallet and then sell it on Robinhood. Because Robinhood does not know how much it costs you to buy the crypto it cannot report the capital gain or loss from the sale. If you have only ever bought and sold crypto on Robinhood and not another platform then your life is easy and you just need to upload the 1099 form from your Robinhood account. Otherwise, you need to use tax accounting software such as Coinledger to calculate your taxable income. 

Do I need to pay taxes on crypto gains?

Yes, in the United States, the Internal Revenue Service (IRS) treats virtual currency like property.

This means that any gains or losses from cryptocurrency transactions are subject to taxation, just like any other investment that generates income. The IRS requires taxpayers to report their cryptocurrency transactions, including buying, selling, and exchanging cryptocurrencies, on their annual tax returns.

The tax rate depends on your income tax bracket and whether you are reporting short-term capital gains or long-term capital gains. The sale of a cryptocurrency is treated as a taxable event. If you have been using multiple crypto exchanges then you will need to use a platform that can aggregate your cryptocurrency transactions and calculate capital gains taxes. In this case, you should make sure to speak to a tax professional to guide you. 

Apart from selling crypto, mining rewards, airdrops, and hard forks are also treated as ordinary income. 

Should I report capital losses?

Yes, by reporting capital losses you can offset any taxes on gains over the next few years. However, make sure you consult a tax advisor on the specifics. If you sell a capital asset at a loss and then buy back the same asset or a similar one within 30 days then you won’t be able to declare the loss. What you are trying to do is known as wash trading. 

When does Robinhood report my crypto transactions? 

Robinhood will email you your tax form by February 15 of each tax season. In there, you will be able to see a consolidated report on the state of your digital assets that is tied to your social security number. You will see all Robinhood transactions but if you have made transactions outside of Robinhood then these won’t show up. This means you may end up paying tax on the total gross proceeds of crypto that is shown in your Robinhood tax forms. To avoid this you need to make sure you check all your crypto trades across platforms and report the cost basis. 

How does Robinhood Crypto calculate the cost basis?

Robinhood uses the FIFO (First-in, First-out) method to calculate your cost basis. This means that Robinhood sells your crypto in the order that you bought. For example, if you buy 1 BTC in January and 1 in February and then sell 1 BTC in March Robinhood will assume it is selling the first BTC you bought. You will then need to pay crypto taxes on the difference if you made a profit from the sale. 

Though you can change the method in theory in practice you will end up with different results to what Robinhood reports which will not sit well with the IRS.

Does Robinhood report individual retirement accounts?

Yes the Robinhood platform will provide you with Form 1099-R by the end of January 31 and Form 5498 by the end of May 31. 

Does Robinhood keep track of the cost basis?

Yes to the extent that you used Robinhood to buy crypto Robinhood will keep track of your cost basis and you can download this information as a csv. However, Robinhood cannot know the cost basis of any crypto that you import into Robinhood via its wallet.

FAQs

What happens when you sell crypto on Robinhood?

Robinhood will report any capital gains or losses for tax purposes in form 1099-b which it will share with the IRS at the beginning of the year. 

How much money do you have to make on Robinhood to do taxes?

Robinhood reports any revenue or capital gains that are above $600. 

Does Coinbase report to IRS?

Yes, Coinbase issues form 1099-misc to tax authorities. Form 1099-MISC is used for reporting payments that are not subject to self-employment tax such as rents and prizes. 

Do I pay taxes on Robinhood if I don’t withdraw?

It doesn’t matter whether you withdraw your cash or not. Robinhood users who sell their crypto and make a capital appreciation on the sale are required to report that income to the tax authorities and pay the corresponding tax on it. 

How do I report crypto income to the IRS

You need to fill in form Form 1040 Schedule D to show any capital gains or losses as well as Form 894. Please consult a tax accountant for the details

Do I need to pay tax on airdrops?

Yes airdrops are considered a form of crypto income and you do get taxed on it just like you do with mining rewards or any form of interest or yield that you earn on your assets.

If you only used Robinhood to buy and sell crypto during the year then all you need is the 1099 form that Robinhood will send to you. However if you have used multiple exchnages and wallets you are better off using a crypto tax accounting software. In the case of Robinhood there is not automated way to connect to these platforms via API which means you will need to download the csv file with your transactions from Robinhood and upload it to the software provider’s platform.

Here are some popular providers

  • Coinledger
  • Zenledger
  • Koinly
  • ClearTax
  • Fireblocks

Does Robinhood report on stock and ETF gains and losses?

Yes, Robinhood provides the IRS with a comprehensive report on all your financial activity including any profits or losses you made trading Robinhood stocks or ETFs as well as any income from options trading.

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Markos Koemtzopoulos is the founder and main writer of ElementalCrypto. He has been a lecturer at the University of Nicosia on cryptocurrencies and DeFi and has taught two courses on crypto and blockchain technology.