The Internal Revenue Service is expected to improve its ability to detect cryptocurrency tax reporting errors as digital asset brokers face new requirements to issue Form 1099-DA to investors. This form outlines gross proceeds from crypto transactions and became mandatory for transactions occurring after the start of 2025. Research indicates that between 32% and 56% of U.S. taxpayers with crypto holdings may not be properly reporting their transactions to federal authorities, according to findings published earlier this year in the Review of Accounting Studies.
The IRS National Taxpayer Advocate indicated in June that a significant portion of cryptocurrency owners may be operating outside compliance guidelines. However, experts suggest much of this non-compliance stems from confusion and inadequate guidance rather than deliberate evasion. The new reporting infrastructure will likely expose discrepancies that could result in enforcement actions against investors, regardless of whether the errors were intentional.
A primary challenge in crypto tax reporting is that the infrastructure supporting traditional assets like stocks remains largely absent for digital currencies. Investors must independently determine critical information such as cost basis and purchase dates, which directly impact capital gains calculations and tax rates. The situation mirrors the state of stock reporting roughly a decade or more ago, before the IRS implemented comprehensive cost-basis reporting requirements for brokers and custodians.
Complexity multiplies quickly when investors conduct multiple types of transactions across different platforms and digital wallets. Activities including staking, mining, airdrops, transfers, and decentralized finance lending create substantial record-keeping burdens. Accountants recommend that investors immediately begin preserving complete transaction histories, utilizing specialized crypto tax software, and maintaining detailed records across all wallets and exchanges to demonstrate compliance with IRS regulations.
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