If you have finally started getting considerable returns or profit through your crypto investments, trades, and rewards through KuCoin exchange, then the first thing you might want to know is if KuCoin reports to the IRS. As you are most likely aware, trading and profiting from crypto investments are subject to income tax or capital gains that you need to pay to the IRS. If you avoid paying these taxes, you risk facing heavy penalties or even tax-fraud charges, even if you hide your earnings or gains for just a short period.
So the question here is, do you need to worry about that if you are trading or investing with KuCoin? Does KuCoin directly report to the IRS, and are your taxes automatically calculated?
Does KuCoin report to the IRS and other governmental organizations?
As of the time of writing, KuCoin does not directly report to the IRS or any other governmental organizations located in the US. KuCoin is not actually a licensed crypto exchange operating in the US, so this might be the main reason why it does not directly report to the IRS.
However, KuCoin's terms, conditions, and privacy policies do state that your private data might be disclosed to any governmental party if requested. In short, if the IRS requests KuCoin to provide your financial history on the platform, they will be able to access all your transactions from the day you signed up on the platform until now.
Why is it important to report to the IRS?
It is not only important, but it is mandatory for residents of the USA to report to the IRS, as it is the only governmental organization in the country managing and keeping track of residents' taxes.
If you are earning or profiting through crypto exchanges like KuCoin, you will have to report to the IRS to save yourself from penalties. Since KuCoin does not directly report to the organization, you will have to go through the manual process to get it done. If you try to hide your crypto transactions from the IRS, you could face massive penalties, huge interest rates on the amount of tax withheld, and even criminal charges.
What crypto activities do I need to pay tax on?
It is very important to understand what particular crypto activities are liable for taxes and if there are any scenarios where you don't need to pay tax. For starters, any casual trading activity you perform on KuCoin or any other crypto exchange is liable for tax as it is selling one asset and purchasing another. If you are mining cryptocurrencies using a phone or computer, you will be liable to pay taxes on those coins. Any other activities that reward you with more crypto, such as staking, liquidity pools, and crypto interest accounts also incur tax.
The good news is that you do not have to pay any type of tax if you are simply holding a crypto asset. You can continue to HODL your cryptocurrencies in your crypto wallet, and you will not be taxed no matter the value of your assets. You will only be taxed when you sell them, or convert them to a different coin.
How can you report your KuCoin transactions to the IRS?
It is relatively simple and convenient to report your KuCoin transactions to the IRS, as the platform allows the users to export all of the data of their transactions with a single click. You can easily generate a CSV or API file with the help of KuCoin and their collaboration with Koinly, which provides detailed reports according to your request. You can even select a particular timestamp and generate the results to report to the IRS.
How much crypto do you have to earn to report to the IRS?
It does not matter if you earn $1 or $100,000 in crypto, you will have to report every single gain to the IRS in order to fulfil your tax duties and avoid penalties. Some crypto exchanges like Coinbase claim that they report directly to the IRS if the crypto income of any user exceeds $600, but this is only their own policy. In the case of KuCoin, it is better to report to the IRS even if you have gained only a few dollars in the financial year.
What is KuCoin?
KuCoin is a global cryptocurrency exchange that has been offering its services for a few years now. The exchange supports users from more than 200 countries and has over 11 million users from around the world. The reason behind the popularity of KuCoin is it's all-in-one services that include pretty much everything a crypto enthusiast would want. Not only can you purchase and sell cryptocurrencies on the platform, but you can trade more than 600+ coins, use free trading bots, earn crypto through various methods, and explore NFTs all in a single place. Sign up here if you do not already have an account.
In the end, keep in mind that unlike crypto exchanges like Robinhood and Coinbase that directly report to the IRS, KuCoin does not. You need to do it yourself, which may seem like a lot of work, but the whole process is easy and does not take much time. You just have to be honest and provide all the necessary info along with the details of transactions for the tax to be calculated without any errors.
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