Does Uphold Report to the IRS for Tax Purposes?
Understand how Uphold reports transactions to the IRS, which forms may apply, and what this means for your tax obligations as a user.
Cryptocurrency transactions are subject to tax reporting, and exchanges like Uphold may need to share user information with the IRS. Many users wonder if their trading activity will be reported and how it affects their tax obligations.
Understanding tax reporting rules helps avoid unexpected liabilities and ensures compliance.
Platform Data Sharing Requirements
Uphold, like other U.S.-based financial platforms, must follow federal regulations requiring the reporting of certain transactions. The Infrastructure Investment and Jobs Act of 2021 expanded these obligations, classifying cryptocurrency exchanges as brokers. This means Uphold must report taxable transactions, such as sales and trades, when users meet specific thresholds.
To comply, Uphold collects user information, including name, address, and Social Security number, for accurate tax filings. The exchange may also report accounts held by U.S. taxpayers under international agreements like FATCA, sharing data with tax authorities in other countries if users have tax obligations abroad.
Transactions That May Trigger Filing
Certain activities on Uphold require tax reporting, particularly those involving realized gains or income. Selling cryptocurrency for U.S. dollars is taxable, with gains or losses calculated based on the difference between the sale price and purchase cost.
Trading one cryptocurrency for another, such as exchanging Ethereum for Solana, is also taxable. Even without fiat currency involved, the IRS treats this as a disposal of the original asset. The taxable amount is based on the fair market value of the acquired asset at the time of the trade compared to the cost basis of the asset being exchanged. Gains are subject to capital gains tax, which ranges from 0% to 37%, depending on income and holding period.
Receiving cryptocurrency through staking rewards, interest payments, or referral bonuses is considered ordinary income. These earnings must be reported at their fair market value on the day they are received. If later sold or traded, any capital gains or losses must also be reported.
Types of 1099 Forms
Uphold may issue different 1099 forms depending on a user’s transactions and earnings.
– 1099-B: Reports proceeds from digital asset sales, including acquisition date, sale date, gross proceeds, and whether the gain is short-term or long-term. Since the IRS classifies cryptocurrency exchanges as brokers, Uphold is expected to issue this form to users who meet reporting thresholds.
– 1099-MISC: Covers cryptocurrency income unrelated to asset sales, such as staking rewards and promotional bonuses. If a user receives at least $600 in such payments in a tax year, Uphold must issue this form and submit a copy to the IRS. These earnings are taxed as regular income.
– 1099-K: Typically issued when a user exceeds both 200 transactions and $20,000 in gross payments within a calendar year. However, the IRS has been working to lower this threshold, and future legislative changes could impose stricter reporting requirements. While the 1099-K does not calculate gains or losses, it provides a record of gross payments received, which taxpayers must reconcile when filing.
Personal Filing Responsibilities
Even if Uphold does not issue a tax form, users must accurately report their cryptocurrency transactions. Maintaining detailed records of trades, income, and transfers—including acquisition costs, fair market values on transaction dates, and fees—is essential. Poor record-keeping can lead to miscalculations and increase audit risk.
Users moving assets between exchanges must ensure consistency in reporting. Uphold does not track external transactions, so taxpayers must match cost basis across platforms. The IRS allows different accounting methods, such as First-In-First-Out (FIFO) and Specific Identification, but whichever method is chosen must be applied consistently throughout the year.
Potential Tax Classifications
The IRS classifies cryptocurrency transactions based on activity, determining whether they are subject to capital gains tax, ordinary income tax, or self-employment tax.
Capital Gains and Losses
When digital assets are sold or exchanged, the IRS treats the transaction as a capital event. If the asset was held for more than a year, the gain qualifies for long-term capital gains tax rates of 0% to 20%, depending on taxable income. If held for a year or less, short-term capital gains apply, taxed at ordinary income rates up to 37%.
Losses from cryptocurrency sales can offset gains. If losses exceed gains, up to $3,000 can be deducted against other income, with remaining losses carried forward to future years.
Ordinary Income
Certain cryptocurrency transactions generate taxable income rather than capital gains. Receiving digital assets through staking, mining, or as payment for services falls under this category. The fair market value of the cryptocurrency at the time of receipt is taxed as ordinary income. If the activity is part of a business or self-employment, self-employment tax (15.3%) may apply. Unlike capital gains, income from these sources cannot be offset by capital losses.
Gifts and Donations
Giving cryptocurrency as a gift is not taxable for the giver, but if the recipient later sells the asset, they inherit the original cost basis and holding period. If the total value of gifts given to an individual exceeds the annual exclusion limit ($18,000 in 2024), the giver may need to file a gift tax return, though no tax is typically due unless lifetime exemptions are exceeded.
Donating cryptocurrency to a qualified charity can provide tax benefits. If the asset has been held for more than a year, the donor can deduct its fair market value without triggering capital gains tax, making it a tax-efficient way to contribute.