The IRS is coming for your Crypto, what you need to know!
Last week the Department of Treasury released “proposed regulations” regarding how you need to report your Crypto transactions. Let’s not kid ourselves, we all knew this day was coming. It was not a matter of “if”, but “when” the IRS would want your detailed Crypto information.
The good news is that the “when” is January of 2026. Which means you still have some time to get your Crypto affairs in order. But don’t worry, I am here to tell you what you need to know, so you don’t get in trouble with the IRS.
- What is a Digital Asset Broker?
- What is Form 1099-DA?
- How to get ready for Crypto and the IRS
What is a Digital Asset Broker?
Starting in 2025, if you trade Cryptocurrency using a “Digital Asset Broker” (DAB), the broker will be required to send the IRS tax forms reporting your Crypto transactions.
The IRS defines Digital Asset Brokerages as:
- Centralized exchanges (e.g., Coinbase, Gemini, or Binance)
- Decentralize exchanges (e.g., Uniswap or Pancake Swap)
- Crypto Wallets that let you buy, sell, & trade crypto (e.g., Trust Wallet and MetaMask)
- Physical Bitcoin ATMs and Bitcoin Kiosks
- Wash Sale Rule is also proposed
It looks like the IRS has decided to go after the low hanging fruit first.
Other crypto transactions such as: Bitcoin Mining, Hardware Wallets (that you do not trade on – like Ledger Nano) or Software and Smart Contract Developers are off the hook (for now, but I cannot imagine it will be long after 1099-DAs become normalized, that the IRS will go after these other crypto avenues too.)
What is Form 1099-DA?
The tax form you will receive regarding your cryptocurrency transactions is called Form 1099-DA (the “DA” standing for Digital Assets).
Very similar to a 1099-B that you receive from your brokerage account for trading stocks, they require the same information:
- Purchase dates,
- Sales dates,
- Cost Basis of cryptocurrency,
- Proceeds from sale of cryptocurrency
Calculating your Cost Basis (amount you purchased the crypto for) will be challenging for those who transfer their Cryptocurrency between various wallets. Be very careful, because if you don’t let the Digital Asset Broker know how much you purchase the crypto for, they will automatically put down Zero Basis – which means you pay tax on all of the crypto transaction (not just the gain).
How to Get Ready for Crypto and the IRS
These proposed regulations don’t go into effect until 2025, so you won’t start seeing 1099-DAs until 2026, so you have some time.
You should be tracking your basis and crypto activity already. If you trade a lot and use various wallets and exchanges, you should be using Crypto Tax software like CoinLedger.io or ZenLedger.io. If you’re not, you better get on it quick, so you are covered by 2025.
Additionally, a lot of the Digital Asset Brokers will attempt to lobby with members of Congress to try and water down the IRS’ proposals. However, I am not sure however effective they will be. Ever since the “covfefe” that Sam Bankman-Friend had regarding FTX, I doubt there is much appetite in Congress for zero crypto regulation, no matter what side of the isle you are on.
I do not believe this is the last we have heard of these regulations. There will be more fighting in Congress and there may be some changes. As always, I’ll be updating you as soon as I know. In the meantime, keep “Stacking Sats“.
Also, if you haven’t read my articles about crypto, you should check out the links below.