Navigating IRS Form 1099-DA: Crypto Tax Confusion Ahead for Investors

The first filing season for the IRS’s new Form 1099-DA is revealing significant confusion among US crypto investors. Introduced for digital-asset sales in 2025, the form aims to increase IRS visibility by requiring brokers to report gross proceeds. However, a Coinbase and CoinTracker survey found 61% of users were unaware of the new rules, despite many believing they understood crypto taxes.

A primary risk for taxpayers is that most 2025 Form 1099-DA statements will not include cost basis information, particularly for assets transferred from other brokers or self-custody wallets, or those bought before 2026. This means the form merely signals a transaction occurred without providing the necessary data to calculate actual gains or losses, leading to a “false sense of completeness.” Tax practitioners, like Deloitte’s Jonathan Cutler, warn that the form is a signal, not a finished tax answer, stressing the critical need for investors to maintain meticulous personal records.

Further compounding the issue, many investors misunderstand what constitutes a taxable event. The survey indicated only 49% correctly identified selling crypto as a tax trigger, with others mistakenly believing transfers to a bank or between accounts were the trigger. The IRS treats digital assets as property, and taxable events include selling for fiat, exchanging for another digital asset, or using them for goods/services. Despite 76% knowing basis adjustments might be needed, only 35% had made them previously, highlighting the complexity.

The IRS’s initiative reflects a broader push to close the tax gap, as past data suggested significant underreporting of crypto holdings and gains. While Form 1099-DA gives the IRS a clearer view of sales, it places the burden squarely on investors to prove their cost basis, holding period, and actual gains or losses. Until robust personal records are reconciled, the government may see a sale more clearly than the investor can explain the profit.

(Source: https://cryptoslate.com/irs-new-forms-may-leave-crypto-investors-guessing-their-tax-bill/)