The IRS is getting better at spotting crypto tax mistakes. Here's what it means for investors
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- Form 1099-DA took effect for the 2025 tax year, requiring digital asset brokers to issue tax forms reporting gross proceeds from crypto transactions on or after Jan. 1, 2025 — a visibility boost that the IRS National Taxpayer Advocate said raises the odds the agency will identify discrepancies.
- IRS National Taxpayer Advocate Erin Collins told Congress in June that only 32% to 56% of U.S. taxpayers with crypto holdings report transactions to the federal government, though most noncompliance is unintentional and stems from confusion rather than willful neglect.
- CPA Troy Lewis of Brigham Young University compared the current crypto tax landscape to stocks more than a decade ago, before Form 1099-B phased in starting in 2011, noting that cost-basis and holding-period infrastructure still largely falls on taxpayers.
- Crypto portfolios become especially tangled when investors move assets across multiple wallets and platforms — behavior CPA Laura Walter attributes partly to bankruptcies like BlockFi, Celsius, and FTX — sometimes leaving clients to account for hundreds of taxable transactions in a single year.
- Walter warned that the IRS will not accept difficulty as a defense, recommending that investors use crypto tax software such as CoinTracking, Koinly, or Summ to log every wallet, exchange, transfer, fee, and transaction rather than rely on platforms to retain records indefinitely.
- Lewis identified DeFi lending — borrowing and lending crypto without intermediaries — as the most challenging and 'troubling' aspect of crypto taxation, with many small executing contracts and no intermediary to keep tax records.
Why it matters: Form 1099-DA closes the reporting gap that let crypto investors fly under the radar, mirroring the 2011 rollout of 1099-B for stocks — meaning the 44-68% of crypto holders who weren't reporting now have a paper trail straight to the IRS. For investors tangled in cross-wallet transfers, staking, airdrops, and DeFi contracts, the clock has started on cleanup before enforcement lands.
