Crypto taxes: IRS reporting rules are turning into a major headache

The tax man is watching, but he’s lowkey confused

Real talk: filing your 2025 crypto taxes has officially become a total vibe check that nobody asked for. The IRS has rolled out new rules requiring brokers to report gross proceeds from your digital asset sales, giving the agency more visibility into your bags than ever before. But here’s the catch: while the IRS can see your sales, the forms many exchanges are sending out—the 1099-DA—are often incomplete or missing the crucial 'cost basis' (the price you originally paid).

This is creating a massive headache for investors. According to an August survey by Awaken Tax, 21% of crypto traders who filed or requested an extension were still waiting for info from their platforms. Another one in five reported that their 1099-DA forms were either incomplete or just straight-up inaccurate. For active traders, this is a nightmare. As Chris Herbst, managing director of CountDeFi, noted, the IRS sees the full sale value but ignores your cost, which can make your reported gains look way higher than they actually are.

Why it’s giving a math quiz

If you’re a degen who moves assets between wallets and multiple exchanges, the plot thickens. When you transfer crypto, that cost basis info doesn’t always follow the asset. Andrew Gordon of Digital Asset Tax Action points out that most tax software currently lacks the tools to reconcile these 1099-DA forms because they aren't even machine-readable yet.

Sharon Yip of Crypto Tax Advisors highlighted a wild case where a client had over $300,000 in stablecoin trades, but their exchange’s 1099-DA only reported less than $100,000 in proceeds. It’s messy, and exchanges are still struggling to adapt to the new regulations. Some, like Kraken, reportedly sent out forms just weeks before the deadline.

The move for 2026

Things might get slightly better by 2026, when brokers will be required to report cost basis for 'covered' assets. But even then, assets transferred from private wallets or other exchanges might still slip through the cracks.

Why it matters

Do not just copy-paste the numbers from your 1099-DA onto your return. The IRS expects you to report your accurate gains and losses, meaning you are responsible for maintaining your own records, including transaction history, fees, and transfer dates. Keep your receipts, stay organized, and remember: this is definitely not financial advice.