The New IRS Crypto Tax Form Shows Activity, Not Actual Tax Liability
I think there’s a real problem brewing with this new IRS Form 1099-DA. The first filing season is here, and honestly, it seems like many crypto investors are getting these forms without really understanding what they mean. A survey from Coinbase and CoinTracker found that 61% of US crypto users didn’t know about the 2025 reporting rules. That’s surprising when you consider that 74% said they understood crypto could be taxable.
But here’s the tricky part: the IRS is now getting more standardized data on digital asset sales from brokers. Starting this year, brokers have to report gross proceeds on Form 1099-DA. The basis reporting—that’s the cost you paid for the asset—doesn’t really kick in until 2026 for covered securities.
Why This Form Creates Confusion
So what happens? The IRS has said most 2025 statements won’t include basis information. That means the form shows a sale happened, but it doesn’t do the work needed to figure out if you actually made money or lost money on that sale. For investors, this creates what feels like a false sense of completeness. You get this official-looking form, but it’s not telling you the whole story.
Think about a typical scenario: someone buys Bitcoin on one exchange, moves it to a self-custody wallet, transfers some to another platform, and sells there. They’ll get a Form 1099-DA showing the disposal proceeds. But if the asset came from another broker or wallet, the form probably won’t have the basis information needed to calculate the real taxable result.
Tax professionals are warning people not to treat this document like a finished brokerage statement. Jonathan Cutler from Deloitte reportedly said the 2025 form is mainly a signal that you transacted in crypto. He added that taxpayers “really need their own records to be tight.” The IRS says the same thing in simpler terms—use Form 1099-DA with your other records, and you have to calculate basis before filing.
Where Investors Are Getting Tripped Up
Meanwhile, the confusion isn’t just about basis. The survey found only 49% of respondents correctly said a tax event is triggered when crypto is sold. Another 41% thought tax applies when crypto is transferred to a bank. 36% believed tax only kicks in once profits rise above some threshold. And 22% thought transferring between accounts itself triggers taxes.
This is happening while users report using an average of 2.5 platforms or wallets. 83% said they use self-custodial wallets, and 71% had transferred assets between wallets or platforms. The new IRS guidance goes against what many retail traders still think—that you only owe taxes when you “cash out” to dollars.
The agency treats digital assets as property. You can receive Form 1099-DA when you dispose of digital assets for dollars, exchange them for another digital asset, use them to pay for goods or services, or use them to pay broker transaction costs. The IRS FAQ says you generally recognize gain or loss when virtual currency is sold for real currency.
So we have a market full of investors who broadly know crypto can be taxable but still misunderstand when taxable events happen and what records they need to keep. The survey found 76% knew cost-basis adjustments might be required, but only 35% had actually made those adjustments before.
Shehan Chandrasekera from CoinTracker put it well: “While crypto brokerages will provide 1099-DA forms this tax year, users are responsible for correctly computing their cost basis, holding period and actual gains or losses. This cost basis issue is uniquely hard to solve.”
What This Means for Tax Season
This reporting push reflects a belief that the old system only captured part of the market. Research using IRS data found the agency appeared to observe only 32% to 56% of US cryptocurrency owners. Another study using Norwegian data found 88% of crypto holders failed to declare holdings or gains.
The current stricter scrutiny might change investor behavior before it fully closes the tax gap. Research on crypto tax-loss harvesting found increased tax scrutiny pushed investors toward more legal tax planning and affected preferences for US-based exchanges.
What practitioners are seeing in this first 1099-DA season is telling. Missing or incomplete basis has forced accountants into what’s been described as forensic reconciliation against client-maintained records rather than simple form-matching.
For US investors filing this year, the lesson is practical. Form 1099-DA gives the IRS a cleaner view of many 2025 crypto sales. But it doesn’t, by itself, settle your tax bill. You still have to prove what you paid, where the asset moved, how long you held it, and whether the disposal produced a gain, a loss, or something much smaller than the proceeds figure on the form.
Until those records are reconciled, the government might see the sale more clearly than you can explain the profit. That’s perhaps the most important thing to remember as tax season approaches.
