Does Kraken share user data with the IRS?

Draken report to the IRS? Yes. Kraken provides customer information to the agency by issuing Form 1099-MISC and Form 1099-INT—both of which report taxable income—to its users and the IRS. In addition, a federal judge ordered Kraken in 2023 to disclose records for customers who conducted transactions totaling $20,000 or more between 2016 and 2020.

What kind of user data will be shared with the IRS?

Crypto exchange Kraken was required to share certain past user data with the IRS in compliance with a court order it received in June. This development has raised concerns among Kraken’s US users, particularly those with transactions exceeding $20,000 in any single year from 2016 to 2020.

In this article, we dive into the details of Kraken’s data-sharing obligations, what kind of user data will be disclosed to the IRS, and how this may affect your tax liabilities.

The court order requires Kraken to provide the IRS with profile information and transaction histories of clients who conducted transactions exceeding $20,000 in any single year between 2016 and 2020. This includes sensitive information such as names, birthdates, taxpayer identification numbers, addresses, phone numbers, email addresses, and detailed transaction records.

While the IRS initially sought more extensive data, including users’ IP addresses, employment details, sources of wealth, net worth, and banking information, Kraken managed to persuade the court to limit the scope of the information to be shared.

As a result, the number of affected clients has been substantially reduced from the IRS’ initial request and now totals 42,017 individuals, according to the June court order.

How are my Kraken transactions taxed?

With the impending IRS data-sharing, Kraken users need to understand how their cryptocurrency transactions are taxed. The US treats crypto as property for tax purposes, so when you sell or exchange your cryptocurrencies on Kraken, you may incur capital gains or losses.

The tax implications of your transactions depend on various factors, including the duration you held the assets, the profit or loss incurred, and your overall tax bracket. It’s advisable to consult a tax professional and use crypto tax software like ours at TokenTax to accurately calculate your tax liabilities and ensure compliance with tax regulations.

Learn more: Coinbase vs. Kraken

What if my Kraken transactions exceeded $20,000 between 2016 and 2020?

If your Kraken transactions exceeded $20,000 in any single year between 2016 and 2020, you are among the individuals whose data Kraken will retroactively share with the IRS. 

It’s essential to ensure you’ve accurately reported your crypto transactions on your tax returns for the specified years in order to avoid potential issues with the IRS, including audits, fines, or other penalties.

If you’ve failed to properly report crypto on past tax returns, don’t panic. You’re able to amend past returns, and it’s better to file crypto taxes late than not at all. And TokenTax can help.

How TokenTax can help

TokenTax is a crypto tax calculator and full-service accounting firm that can assist you in correctly filing your crypto taxes, regardless of your trading activities or location. TokenTax offers features such as data import, API and wallet integrations, and the tax reports you need to help you effectively manage your crypto tax liability.

Critically for those impacted by the retroactive Kraken reporting, TokenTax can also help you amend past returns. Failure to report crypto taxes can have serious consequences, including fines, audits, and other penalties. If you’re affected by the Kraken disclosures and may not have filed properly in the past, our crypto tax professionals are here to help.

What does the IRS do with the information Kraken provides?

The IRS will use the information provided by Kraken to identify individuals who may have underreported or failed to report their crypto transactions.

The tax agency aims to ensure that cryptocurrency users comply with tax regulations and pay the appropriate amount of taxes on their crypto activities, so it could use the Kraken disclosure to trigger a crypto tax audit for non-compliant Kraken users.