Crypto Tax Nightmare: US Investors Struggle with New Reporting Rules

The new tax rules in the US have created a nightmare for crypto investors trying to file their returns. The Inland Revenue Service now requires brokers to report gross proceeds from certain digital asset sales, but this has led to confusion and difficulties for taxpayers.

A survey by Awaken Tax found that 21% of respondents who had filed or planned to file an extension were still waiting for information they needed from an exchange. A further one in five said their 1099-DA form was incomplete or inaccurate, requiring taxpayers to calculate their gains and losses themselves.

This is a time-consuming task even for infrequent traders, but especially challenging for active ones. Chris Herbst of CountDeFi tax reporting explained that for an active trader, the reported gain can be many times higher than the actual one because each sale is counted at full value with no cost basis against it.

The IRS has emphasized that taxpayers must report digital asset income and gains or losses whether they receive a 1099-DA or not. However, when the basis is not reported, taxpayers need to use their own records to complete their tax return. This can be complicated due to frequent transactions between platforms.