The crypto tax game just changed forever. Starting with 2025 returns, the IRS is requiring brokers to issue Form 1099-DA for all digital asset transactions, effectively ending the era when investors could easily hide crypto gains from Uncle Sam. The move comes as Bitcoin tumbled from record highs, creating both compliance headaches and potential tax-loss harvesting opportunities for millions of crypto holders.
The crypto wild west just got a sheriff. The IRS is rolling out new reporting requirements that will make hiding digital asset gains nearly impossible, fundamentally changing how millions of Americans handle crypto taxes.
Starting January 1, 2025, crypto brokers must issue Form 1099-DA statements reporting gross proceeds from every digital asset sale they process. By 2026, they'll be required to track and report cost basis information - essentially creating the same paper trail that exists for traditional securities. "Many people mistakenly believe that there's no reporting obligation," said Ric Edelman, financial advisor and founder of the Digital Assets Council of Financial Professionals. "Because brokers haven't had to issue 1099s for selling or exchanging crypto in the past, it was easier for people to act as tax cheats."
The timing couldn't be more dramatic. Coinbase, the nation's largest crypto exchange, watched trading volumes surge this year as Bitcoin soared to record highs above $90,000. But the recent selloff that shaved over $40,000 off Bitcoin's peak is now creating unexpected tax planning opportunities.
"This is the time to be thinking about that and planning for it," said Stuart Alderoty, president of the National Cryptocurrency Association. "You can harvest gains and you can harvest losses as well." For crypto investors sitting on paper losses, the next month offers a window to sell positions and offset gains elsewhere in their portfolios.
But the real complexity lies ahead. The IRS treats crypto like property - similar to stocks or real estate - meaning every trade triggers potential capital gains or losses. A simple example from Coinbase illustrates the math: buy Ethereum for $1,500, pay a $50 transaction fee for a $1,550 cost basis, then sell at $2,000 for a $450 taxable gain.
The problem? Many crypto investors have been sloppy with record-keeping, especially those who moved tokens between different platforms or wallets. "If you transferred your tokens to a broker after holding them elsewhere and haven't kept careful records, the broker won't have the amount you purchased the crypto for," explained Daniel Hauffe, senior manager for tax policy at the American Institute of CPAs. "The broker would only know the price when you transferred it."
