SKN | IRS Crypto Reporting Rules Create New Tax Headaches for US Investors

Key Points:

• US brokers began reporting gross proceeds from certain digital-asset sales for 2025, giving the IRS greater visibility into crypto transactions while generally leaving taxpayers responsible for calculating cost basis.
• Tax professionals report problems reconciling 1099-DA forms with transaction histories, particularly for active traders whose crypto moved across multiple exchanges and wallets.
• Beginning with certain transactions in 2026, brokers must generally report cost basis for covered digital assets, although transferred assets and other categories can still create gaps.

The introduction of Form 1099-DA is giving the US Internal Revenue Service greater visibility into cryptocurrency transactions, but the first reporting cycle is also creating challenges for taxpayers attempting to reconstruct their actual gains and losses.

For 2025 transactions, brokers generally had to report gross proceeds from qualifying digital-asset sales, but they were not generally required to report cost basis. That means the IRS could receive information showing how much an asset was sold for while taxpayers still had to determine how much they originally paid for it.

The distinction becomes particularly important for active traders whose transactions span multiple exchanges, wallets and years.

1099-DA Shows Proceeds, but Basis May Be Missing

The basic calculation for a crypto gain is straightforward. If an investor purchases Bitcoin for $9,000 and later sells it for $10,000, the taxable gain is generally $1,000.

But a 2025 Form 1099-DA could report the $10,000 sale proceeds without reporting the $9,000 cost basis. The taxpayer would therefore need to reconstruct the missing information using their own records.

The IRS explicitly warned taxpayers that most 2025 1099-DA statements would not include basis and that taxpayers would need to calculate it to determine their gains or losses. The agency also says taxpayers must report taxable digital-asset income, gains and losses regardless of whether they receive a 1099-DA.

Crypto Transfers Make Recordkeeping More Complicated

The problem becomes more difficult when digital assets move between platforms.

An investor might purchase Bitcoin on one exchange, transfer it to a private wallet, move it to another exchange and eventually sell it there. The second exchange may not have the original acquisition information needed to establish the asset’s cost basis.

The IRS itself emphasizes that taxpayers and tax professionals may need to reconcile transactions across multiple exchanges, wallets and accounts when determining basis.

This creates a recordkeeping requirement that extends beyond the individual sale. Acquisition dates, purchase amounts, transaction fees and transfers can all become relevant when determining the taxable result.

A missing transaction from years earlier can therefore affect the calculation of a gain reported much later.

Incomplete Forms Can Add Another Layer of Work

Tax professionals have also reported difficulties reconciling 1099-DA information with their clients’ broader transaction histories.

Differences can arise when exchanges use different reporting formats or when a taxpayer’s activity spans multiple platforms. Stablecoin transactions can also produce large volumes of activity, making it more difficult to determine whether the proceeds shown on an information return capture the complete trading history.

The IRS has acknowledged that the new reporting framework is being phased in and provided transition relief to brokers for 2025 reporting. For transactions occurring in 2025, the agency said it will generally not impose penalties when brokers make a good-faith effort to file and furnish accurate Forms 1099-DA on time.

That transition period reflects the fact that brokers are implementing a new reporting system while taxpayers and tax professionals are simultaneously adapting their own processes.

IRS Visibility Does Not Replace Taxpayer Records

The new reporting system was not designed to make the 1099-DA a complete replacement for an investor’s transaction records.

The IRS states that taxpayers remain responsible for reporting all taxable digital-asset transactions even when they do not receive a Form 1099-DA. The agency also says the form should be used alongside other records when determining gains and losses.

This distinction is especially important for investors using multiple custodians or moving assets between centralized exchanges and self-hosted wallets.

A form that reports proceeds can provide the IRS with information about a sale without necessarily containing all the information required to calculate the taxpayer’s actual economic gain.

Cost-Basis Reporting Expands in 2026

The reporting framework changes for transactions beginning in 2026.

Under the IRS rules, brokers must generally report cost basis for covered digital assets sold in 2026, while basis reporting for noncovered securities can remain voluntary. Certain stablecoin and NFT transactions can also qualify for alternative reporting methods.

The change should provide taxpayers with more information for many transactions, but it does not eliminate every potential recordkeeping problem.

For example, assets transferred into a broker from another exchange or wallet can present additional basis-reporting complications. The IRS has specific rules governing transferred-in assets and what brokers can use when determining reportable basis.

The Reporting Burden Is Shifting, Not Disappearing

The introduction of 1099-DA represents a significant expansion of reporting requirements for digital-asset brokers, but the transition is occurring in stages.

For 2025, the primary change was greater reporting of gross proceeds. For 2026 and later transactions, basis reporting becomes more comprehensive for covered digital assets.

That means taxpayers are moving toward a system where the IRS and brokers have more transaction information, but investors still need reliable records covering activity that falls outside a broker’s reporting scope or involves transfers between platforms.

Outlook

The first 1099-DA reporting cycle illustrates the gap between greater regulatory visibility and complete tax reporting. The IRS can now receive substantially more information about qualifying crypto sales, while taxpayers may still need to reconstruct acquisition costs and reconcile activity across exchanges and wallets.

The expansion of cost-basis reporting beginning in 2026 should reduce some of that burden for covered assets, but it will not eliminate the need for comprehensive records. For US crypto investors, maintaining a complete transaction history remains central to determining the actual gains and losses that belong on a tax return.