The IRS’s new requirement for cryptocurrency exchanges to report gross proceeds from digital asset sales has sparked a complex tax challenge for many investors. While these reports increase transparency, the absence of cost-basis data on the forms leaves taxpayers on their own to calculate their true gains or losses, turning the 2025 tax filing season into a source of confusion and frustration.
Why this matters
Cryptocurrency has become a significant part of financial portfolios for millions, but tax regulations are still adapting. The IRS’s move to require brokers to report gross proceeds from crypto sales marks a major shift toward heightened oversight. However, without accompanying cost-basis information (the original purchase price of an asset), the IRS gains visibility into the sale amounts but cannot verify the profitability or tax liability precisely. This gap puts the burden on taxpayers to maintain meticulous records of trades, transfers, and fees.
For active traders executing multiple transactions across numerous platforms, including exchanges and private wallets, accurately tracking cost basis is challenging. Incomplete or delayed reporting exacerbates the problem, increasing the risk of errors or audits. As cryptocurrencies and blockchain technologies evolve, regulators and taxpayers alike face hurdles in aligning tax compliance with the decentralized digital finance ecosystem.
What is happening
For the 2025 tax year, cryptocurrency exchanges were required to provide Form 1099-DA, reporting gross proceeds but not cost basis. This means taxpayers receive documentation showing how much they sold crypto for but not how much they originally paid. Consequently, taxpayers must consult their own comprehensive records to determine gains or losses. According to a survey by Awaken Tax cited in the source, 21% of crypto investors who filed or planned to file extensions still awaited necessary information from platforms, while another 20% reported their 1099-DA forms were incomplete or possibly inaccurate.
Tax professionals are already encountering discrepancies. Sharon Yip of Crypto Tax Advisors noted missing trades on some 1099-DAs and inconsistent reporting formats. For example, one client’s stablecoin trades exceeded $300,000, yet their reported proceeds were under $100,000. Delays in form issuance also appeared; some exchanges like Kraken reportedly sent forms just two weeks before the tax deadline, complicating timely filing.
The IRS emphasizes that taxpayers remain responsible for reporting all digital asset gains and losses, regardless of whether they receive a 1099-DA. This responsibility includes reconciling transactions spread across multiple wallets and exchanges, a task that demands detailed historical transaction data. Experts like Chris Herbst from CountDeFi and Andrew Gordon from Digital Asset Tax Action stress the need for comprehensive records covering trades, fees, transfers, and acquisition details.
What readers can take away
- Receiving a 1099-DA does not mean your tax filing is complete; these forms often lack cost basis, requiring you to maintain your own detailed records.
- Multiple trades and asset transfers between wallets or exchanges must be tracked carefully, as cost basis “follows” the asset and affects tax calculations across platforms.
- Expect delays or inconsistencies in tax documents from exchanges during this transitional period and check forms thoroughly before trusting the information.
- Utilize crypto tax software, but be prepared for manual data entry, especially since many platforms have yet to provide 1099-DAs in machine-readable formats.
- Consult a tax professional experienced in cryptocurrency for guidance, especially if you are an active trader or hold assets across several platforms.
What to watch next
The 2026 tax year promises some relief as brokers will be required to report not only proceeds but also cost basis for covered digital assets, providing more complete information to both taxpayers and the IRS. However, this improved reporting may not cover assets transferred from one platform to another, perpetuating the need for personal record-keeping. Taxpayers should prepare now by organizing their transaction data carefully in advance of the upcoming filing season and watch for potential regulatory updates that could affect reporting requirements or simplifications.
FAQ
Why don’t the 1099-DA forms include cost basis information?
The IRS’s new rules for 2025 mandated that brokers report only gross proceeds from digital asset sales, not the original purchase prices. This partial reporting was intended as a first step in improving transparency but means taxpayers must provide their own cost basis to calculate actual gains or losses.
What challenges do active crypto traders face under these new rules?
Active traders often execute numerous trades across various platforms and wallets. Because cost basis is not reported, each sale appears on 1099-DAs as a gross proceeds figure without offsetting purchase data. This forces active traders to sift through extensive historical transactions and reconcile incomplete or mismatched forms, consuming significant time and effort.
How can I best prepare for crypto tax reporting now?
Keep meticulous records of all crypto activity, including purchase prices, dates, wallet transfers, fees, and sale proceeds. Use crypto tax software where possible, but be ready for manual data reconciliation. Consult tax professionals familiar with crypto to ensure compliance and avoid overstating your taxable gains.
This article is informational only and is not financial advice. Original source: read more here.
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