Cryptocurrency exchange Coinbase has warned that new U.S. tax reporting requirements for digital assets impose unnecessary burdens on retail users and clutter the tax system. The company's tax experts highlighted issues with the IRS's Form 1099-DA, which reports gross proceeds from crypto transactions starting in 2025. They argue that including small transactions, stablecoins, and gas fees leads to over-reporting without real tax implications.
The Internal Revenue Service (IRS) introduced Form 1099-DA to align cryptocurrency reporting with traditional finance, requiring brokers to report digital asset transactions. For transactions on or after January 1, 2025, exchanges like Coinbase will report only gross proceeds to the IRS, leaving customers to calculate their cost basis—the original purchase price—to determine actual gains or losses. Coinbase plans to begin calculating cost basis for customers starting next tax year.
Lawrence Zlatkin, Coinbase's vice president of tax, described the rules as cluttered and confusing, particularly for retail investors dealing with small amounts. "Frankly, [small retail] transactional flow is so small, I just don't know why we're spending efforts as a country focused on them," Zlatkin said in an interview. He added, "I just think it just does a disservice to people when you're trading 50 bucks, let's say, that you get a form like this and you have to report gains or losses. That's just not what the tax system is supposed to be about."
Coinbase also objects to the inclusion of dollar-pegged stablecoins like USDC, which maintain a fixed value and generate no income. "People should pay taxes where they have income," Zlatkin said. "Do you have income on USDC? No, you don't. So why are we reporting USDC transactions?" Similarly, reporting tiny gas fees—network costs often as low as 50 cents—adds unnecessary clutter, according to Zlatkin: "Gas fees might be 50 cents, a buck—do we have to disclose that? Is that a valuable use of resources to collect revenue? And I would posit that the answer is no."
Ian Unger, Coinbase's director of tax reporting information, noted the challenges in tracking cost basis across platforms, unlike equities where transfer statements exist. "That's not the world we live in today for crypto assets," Unger said. "There could be a world where some of this does get easier... But we're not there yet, and so until we get there, there'll be a lot of confusion."
Separately, an IRS proposal would allow exchanges to deliver 1099-DA forms electronically only, with consent obtained during onboarding. Refusal could lead to account termination, though this is optional for brokers. The comment period ends May 5, 2026, with potential implementation for tax season 2027 or later. Coinbase, with 9.2 million monthly transacting users and $376 billion in assets as of its 2025 10-K, is sending millions of these forms to U.S. customers this year.
The rules aim to boost compliance, with estimates suggesting up to 75% of digital asset taxpayers are noncompliant and provisions could raise $28 billion over 10 years.
