Coinbase must withhold a portion of certain payments and send it to the Internal Revenue Service (IRS) when specific tax conditions apply to your account. This article explains backup withholding and non-resident alien (NRA) withholding, and how to stop backup withholding.
Backup withholding
Backup withholding applies to U.S. customers, and to customers we presume are U.S. persons, who haven’t provided valid tax documentation or have an unresolved IRS notice. Backup withholding applies if:
You declared U.S. tax residency on the Coinbase Tax Self-Certification form for the Crypto-Asset Reporting Framework (CARF), and you have not verified your Form W-9.
Coinbase notified you of an active IRS B-Notice or C-Notice that has not been resolved.
You unchecked the backup withholding box on your electronic Form W-9 in the Tax Center. This applies only to interest and dividend payments.
What to expect
Most transactions are blocked. When a transaction is blocked, no payment is made, nothing is taken from you, and your funds stay in your account. Your transactions are permitted again once backup withholding no longer applies.
Some payments are withheld instead. When a payment goes through, we withhold 24% and send it to the IRS. Withheld amounts are credited to your federal tax liability when you file your return. Coinbase doesn’t keep it.
If backup withholding applies, these states add withholding on top of the 24% federal rate:
California: 7%
Maine: 5%
Vermont: 7.2%
Payments affected by backup withholding
Gross proceeds from crypto sales and other disposals reported on Form 1099-DA, starting January 1, 2027.
Staking rewards, USDC Rewards, promotional bonuses, and other miscellaneous income reported on Form 1099-MISC.
Gross proceeds from sales of non-crypto assets, such as stocks and certain derivatives, reported on Form 1099-B.
Stop backup withholding
Follow the steps for your notice:
For a first B-Notice: Verify your Form W-9 in Coinbase Taxes. This also resolves the notice.
For a second B-Notice within three years: Verifying your Form W-9 is not enough. Submit the additional documents listed in the B-Notice article.
For a C-Notice: Only an IRS-issued CP-542 stop notice can stop withholding.
Non-resident alien (NRA) withholding
NRA withholding applies if you are a non-U.S. resident, you are documented with a valid Form W-8, or we presume you are a non U.S. resident under IRS rules, and you receive U.S.-source income through Coinbase. It applies to rewards, interest, dividends, and similar income payments. It does not apply to gross proceeds from crypto sales. These amounts are withheld from the payment and sent to the IRS.
The default rate is 30%. If you submit a valid Form W-8 and claim benefits under a U.S. income tax treaty, a lower rate may apply, depending on your country and the type of income.
To submit your Form W-8, go to Coinbase Taxes.
What appears on your statement
When withholding applies to a transaction, your transaction history shows a separate line item:
Tax withholding covers federal and any applicable state backup withholding.
NRA withholding covers non-resident alien withholding.
Amounts appear in U.S. dollars (USD). For crypto, we calculate the amount using the asset’s fair market value at the time of the transaction, rounded to the nearest cent.
Coinbase doesn't provide tax advice. Consult a tax professional for specific questions about the tax treatment of your transactions.
NRA withholding rates
The default NRA withholding rate is 30%. If you have submitted a valid Form W-8 and claimed benefits under an applicable U.S. income tax treaty, a reduced rate may apply. Treaty rates vary by country and income type.
To submit your Form W-8, go to Coinbase Taxes.
What appears on your statement
When withholding applies to a transaction, your transaction history includes a separate line item labeled “Tax Withholding" for backup withholding (accounts for federal and any applicable state backup withholding) and "NRA Withholding" for NRA. The withheld amount is shown in U.S. dollars (USD). For transactions involving crypto or digital assets, the amount is calculated using the fair market value of the asset at the time of the transaction and rounded to the nearest cent.
Coinbase doesn't provide tax advice. Consult a tax professional for specific questions about the tax treatment of your transactions.