Starting in 2025, centralized cryptocurrency exchanges must report investors' sales and exchanges to the IRS using Form 1099-DA, marking the first year of such third-party oversight. This requirement aims to boost compliance among crypto holders, who previously showed only about 25% voluntary adherence according to a 2023 IRS review. While it eases reporting for compliant users, discrepancies could trigger IRS notices.
A 2023 IRS review indicated that crypto investors have a mere 25% compliance rate for voluntary tax payments, prompting new measures to improve oversight. For the 2025 tax year, centralized exchanges like Coinbase are required to issue Form 1099-DA, reporting gross proceeds from sales and exchanges. Investors will receive copies by January 30, 2026, to aid their filings.
This reporting does not impose new taxes but enables the IRS's Automated Underreporter system to detect mismatches between investor returns and exchange data. Shehan Chandrasekera, head of tax strategy at CoinTracker, explained that such flags could lead to correction notices. On the positive side, Tomer Siegal, vice president of product at Ledgible, noted, “The 1099, while it increases compliance, also makes life a lot easier for those who need to report on their investments.”
Key limitations apply for 2025: Exchanges report only gross proceeds, not cost basis, which investors must calculate for capital gains and losses. Cost basis reporting begins in 2026 for assets bought after January 1, 2025, on the same exchange without transfers, per Siegal. Exempt from 1099-DA are stablecoin sales under $10,000, NFT sales below $600, and wrapped token transactions, though all remain reportable on returns, Chandrasekera added.
Crypto ETFs follow standard Form 1099-B reporting for securities. Decentralized finance (DeFi) platforms, involving peer-to-peer trades, face no 1099-DA requirement; a planned 2027 mandate was repealed, but taxable events must still be self-reported.
Tax treatment unifies across assets: Losses offset gains, with up to $3,000 deductible against ordinary income annually and excess carried forward. Chandrasekera emphasized that losses from stocks can offset crypto gains, providing flexibility in tax planning.