Crypto investors will face tighter scrutiny in 2025 as new IRS reporting rules take effect, marking a major shift for an industry long plagued by low voluntary compliance. An IRS review from 2023 found “the potential for” only a 25 percent compliance rate, suggesting that roughly one quarter of crypto users have been meeting their tax obligations.
That number is expected to rise because centralized crypto exchanges must now report investor activity to the IRS. Anyone who sold or exchanged digital assets this year on platforms such as Coinbase will receive Form 1099 DA. The exchange will also send the form directly to the IRS. Copies must be issued to investors by February 17, 2026 for the 2025 tax filing season.
The new reporting requirement does not create additional taxes, but it gives the IRS greater visibility. If a taxpayer’s return does not match what appears on the 1099 DA, the agency’s Automated Underreporter system may flag the difference and issue a notice, said Shehan Chandrasekera, head of tax strategy at CoinTracker.
The system may also benefit filers. “The 1099, while it increases compliance, also makes life a lot easier for those who need to report on their investments,” said Tomer Siegal, vice president of product at Ledgible.
Some transactions, however, are not included on the 1099 DA. Exchanges are only required to report gross proceeds, not cost basis, in 2025. Investors must calculate their own gains and losses. Beginning in 2026, exchanges will report cost basis only for assets purchased on or after January 1, 2026, and only when both the purchase and sale occur on the same platform without transfers, Siegal said.
Certain sales are also excluded from the new form. central exchanges do not need to report qualified stablecoin sales under 10,000 dollars, NFT sales below 600 dollars, or transfers involving wrapped tokens. All of these transactions must still be reported by taxpayers on their returns.
Crypto ETFs are covered under existing brokerage rules. Sales of bitcoin or ethereum ETFs will appear on Form 1099 B, which is used for stocks, bonds and derivatives.
Decentralized exchanges remain outside third party reporting. Investors trading on defi platforms will not receive a 1099 DA, and a rule requiring those platforms to start issuing forms in 2027 was repealed earlier this year. Taxpayers must still report all taxable defi activity on their returns.
Despite differing forms, the treatment of gains and losses remains consistent across asset classes. Losses can offset gains, and up to 3,000 dollars of remaining losses can be deducted from ordinary income each year. Excess losses can be carried forward indefinitely. Losses in one asset class, such as stocks, can also offset gains in another, including crypto, Chandrasekera said.
As the reporting overhaul takes hold, tax professionals expect compliance to rise sharply, reducing the long standing information gap between crypto transactions and the IRS.
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