New IRS crypto rules may cause confusion for 2025 tax filings

The U.S. Internal Revenue Service (IRS) has introduced a new crypto transaction reporting form, 1099-DA, starting this year, which could complicate the tax season for 2025 transaction earnings, The Block reported. The new form establishes a reporting system where exchanges submit user crypto transaction data to both investors and the IRS. However, exchanges are only required to report gross proceeds from asset sales and will not provide cost basis information, which is the actual purchase price. This means investors must calculate their own cost basis to report their actual profits and losses. Lawrence Zlatkin, vice president of tax at Coinbase, explained that the tax filing process this year could be confusing for many investors because the 1099-DA only reports gross proceeds. The reporting burden is expected to be particularly heavy for investors using multiple exchanges and wallets, as well as for users who have engaged in DeFi transactions or received staking rewards, as they will need to reconstruct their transaction records themselves. Shehan Chandrasekera, head of tax strategy at CoinTracker, said it is nearly impossible for DeFi investors using multiple wallets and exchanges to settle their taxes manually. The tax filing process is expected to become simpler for transactions starting in 2026, as the system will be expanded to require exchanges to report both gross proceeds and cost basis to the IRS.