IRS Cracks Down on Crypto Tax Mistakes with New Reporting Framework
The IRS is stepping up its efforts to track cryptocurrency tax mistakes for investors. Starting January 1, 2025, custodial brokers, including centralized exchanges like Coinbase and Kraken, are required to begin collecting data for a new tax form: the 1099-DA.
The rollout is phased, with brokers only needing to report gross proceeds from digital asset transactions in 2025. Cost basis reporting, which determines actual gain or loss, won't be mandatory until qualifying 2026 transactions.
This means that for the 2026 filing season, taxpayers will have to calculate and reconcile their own cost basis, a significant responsibility for crypto investors. The IRS has classified digital assets as property since Notice 2014-21, making every sale, swap, or exchange a taxable event.
The new reporting framework was established by the Infrastructure Investment and Jobs Act of 2021 and final Treasury and IRS regulations were released in July 2024.