Exchanges reporting crypto gains to IRS becomes tax nightmare

The IRS’s new 1099-DA reporting requirement for 2025 gave tax authorities broader visibility into gross proceeds from certain digital-asset sales, but it did not mandate brokers report taxpayers’ cost basis. That gap has left many taxpayers and preparers reconciling forms that show sale values without the purchase information needed to compute gains and losses.

Survey data and tax professionals interviewed by Magazine describe widespread friction during the first filing season under the rule. An August Awaken Tax poll of 1,000 US crypto investors found 21% of respondents who had filed or planned to file an extension were still waiting on information from an exchange or platform, and roughly one in five said their 1099-DA was incomplete or they were unsure it accurately reflected their trades.

Tax preparers report concrete mismatches between exchange forms and customers’ transaction histories. Sharon Yip of Crypto Tax Advisors said some clients’ 1099-DAs omitted trades, used inconsistent statement formats, or inconsistently showed basis on certain trades despite basis reporting not being required for 2025. She recounted one client whose exchange reported less than $100,000 in stablecoin proceeds while the client’s activity exceeded $300,000 in stablecoin trades that year.

Timing and format problems have compounded the difficulty. Andrew Duca of Awaken Tax said some exchanges, including Kraken, sent forms late in the filing season — Duca noted Kraken issued 1099-DAs roughly two weeks before April 15 in one instance — and some 1099-DAs contained no transaction details. Tax professionals also say most crypto tax software either lacks tools to import and reconcile 1099-DAs or still requires manual entry because brokers did not provide forms in machine-readable formats.

The practical consequence is that taxpayers must retain and assemble full transaction histories to establish cost basis when it is not reported by brokers. Experts say that history should include all trades, fees, deposits, withdrawals and transaction identifiers, since basis follows an asset as it moves across wallets and platforms. That record-keeping burden is especially heavy for active traders whose activity spans multiple venues and years, creating a “record-keeping gap” that affects both taxpayers and exchanges.