New IRS Crypto Tax Reporting Rules: What You Need to Know

New IRS Crypto Tax Reporting Rules: What You Need to Know

Starting in 2025, the IRS is rolling out new federal reporting requirements for digital asset transactions, including cryptocurrencies such as Bitcoin, Ethereum, and stablecoins. These changes are designed to bring digital assets under the same kind of standardized reporting rules that already apply to traditional investments like stocks and mutual funds.

What’s Changing

1. New Form 1099-DA
Beginning with the 2025 tax year, all major cryptocurrency brokers and exchanges — such as Coinbase and others — must report sales and exchanges of digital assets to both the IRS and their customers using a new form called Form 1099-DA (Digital Asset Proceeds).

For 2025 filings, Form 1099-DA will show gross proceeds from each sale or exchange of digital assets. It will not yet include cost basis (the original purchase price), so taxpayers will still need to maintain their own transaction records to accurately calculate gains or losses.

Starting in 2026, brokers will begin reporting both cost basis and gross proceeds for certain “covered” digital assets. This means the IRS will have a clearer picture of taxpayers’ actual gains or losses on digital asset trades — similar to how stock transactions are currently reported on Form 1099-B.

Confirming Tax Status

Another key change involves tax certification. By 2026, digital asset brokers will begin requesting tax identification information (typically Form W-9 for U.S. taxpayers). Traders who do not provide a valid taxpayer identification number (TIN) will eventually be subject to backup withholding — a flat 24% federal tax on proceeds, with possible additional state withholding.

To allow time for implementation, the IRS has provided transitional relief. Backup withholding for digital asset transactions is not expected to begin until January 1, 2027. At that point, exchanges will be required to withhold taxes on proceeds for any customer who has not verified their tax status.

Why This Matters

These new rules are part of the federal government’s broader effort to ensure tax compliance and transparency in the rapidly growing digital asset market. While crypto has always been taxable — capital gains, staking rewards, and other income have long been subject to federal reporting — the new standardized reporting forms will give the IRS much more visibility into taxpayer activity.

For most investors, this means the IRS will receive the same transaction information that you receive, reducing errors and omissions but also increasing the risk of mismatched data if your personal records are incomplete.

What You Should Do

• Keep detailed records of all your crypto transactions, including purchase price, sale price, dates, and any transaction fees.

• Confirm your tax identification with any exchange or broker you use before 2027 to avoid backup withholding.

• Review your 2025 tax documents carefully. You may begin receiving Form 1099-DA in early 2026 for your 2025 crypto activity.

• Consult a tax professional if you trade frequently, use multiple exchanges, or participate in staking, mining, or DeFi platforms.

Our Perspective

At Pivotal Forensic Accounting and Audits, we expect these changes to significantly improve reporting accuracy over time, but the transition period will require extra diligence from taxpayers. Since 2025 returns will still rely on self-maintained cost-basis data, accurate personal records remain essential.

Our team is monitoring IRS guidance closely and will continue to advise clients on the best practices for digital asset compliance and reporting as these regulations evolve.

Pivotal Forensic Accounting and Audits
Supporting clarity, compliance, and confidence in a changing tax environment.