Exchanges Reporting Crypto Gains To IRS Becomes Tax Nightmare

It’s that time of year again in the United States. The days start to draw in, the leaves start to fall, and the tax man comes knocking for your 2025 return.

This year, thanks to the Inland Revenue Service’s new rules, the agency now knows more about Americans’ crypto trades than ever before, with brokers required to report gross proceeds from certain digital asset sales.

But unfortunately for some taxpayers, getting a form from an exchange hasn’t made filing their returns any easier.

A survey of 1,000 US crypto investors conducted in August by Awaken Tax found that 21% of respondents who had filed, or planned to file a tax extension, said they were still waiting for information they needed from an exchange or crypto platform.

A further one in five said their 1099-DA, the tax form brokers use to report certain digital asset sales, was either incomplete or they weren’t sure whether it accurately reflected their transactions.

The numbers come as taxpayers attempt to navigate the first filing season under the new reporting rules, with those who filed for an extension having until Oct. 15 to submit.

For 2025, brokers were generally required to report the proceeds (how much an asset was sold for), but not the cost basis (how much the taxpayer originally paid for it).

That requires taxpayers to calculate their gains and losses themselves, which isn’t much fun even for infrequent traders, but is a time consuming quagmire for active ones.

Chris Herbst, managing director of CountDeFi tax reporting, tells Magazine, “For an active trader, that number can be many times their real gain, because each sale is counted at full value with no cost against it.”

And that gets to the heart of the problem: the IRS can see the sale, but the taxpayer still has to work out what they actually made.

What the new 1099-DA actually tells the IRS

For a simple transaction, the calculation is straightforward. If you bought Bitcoin for $9,000 and sold it for $10,000, the gain is $1,000.

Understanding your Form 1099-DA. Source: IRS.gov

But a 2025 1099-DA could show the $10,000 in proceeds without reporting the $9,000 basis needed to calculate that gain. So if you don’t know how much you spent on a particular crypto asset, working out the math can become a Byzantine exercise.

Related: US House tax committee advances crypto tax overhaul in 38–5 vote

And it means taxpayers need their own records to fill in the missing pieces, including information that may stretch across multiple exchanges, wallets, trades and years.

“The gap is real,” says Herbst, “but it is a record-keeping gap on the taxpayer side as much as a reporting gap on the exchange side.”

When the forms don’t match

Tax professionals say they are already seeing problems when taxpayers try to reconcile the new forms with their transaction histories.

Sharon Yip, founder of Crypto Tax Advisors, says her firm has found discrepancies between the 1099-DAs received by clients and the crypto tax reports it prepared for them.

Some forms did not include all the trades clients made during 2025, Yip says, while exchanges also used different formats for their customer statements. Some exchanges reported cost basis on certain trades but not others, she says, even though reporting basis was not mandatory for 2025:

“It’s very confusing for recipients to understand how to reconcile their 1099-DAs when compared to the crypto tax report they should use to file their tax return.”

She also gives an example involving stablecoins, saying one of her firm’s clients had more than $300,000 in stablecoin trades on an exchange in 2025, but the exchange’s 1099-DA showed less than $100,000 in total stablecoin proceeds.

And the issues can start before taxpayers even get to calculating their gains. Andrew Duca, founder of Awaken Tax, says the firm saw customers receiving 1099-DAs relatively late in the filing season.

“Because this regulation is new, a lot of exchanges are still trying to figure it out,” he says, pointing to exchanges like Kraken that “didn’t send any forms to users until two weeks before the tax deadline of April 15.”

Duca says Kraken only sent 1099-DA forms two weeks before the deadline. Source: Andrew Duca

Duca also cites the example of a Kraken 1099-DA from around the same period that shows no reported transaction information.

Kraken did not respond to Magazine’s request for comment.

The information taxpayers still need

But here’s the thing: the new forms were never intended to replace taxpayers’ own records. The IRS says taxpayers must report digital asset income and gains or losses whether they receive a 1099-DA or not.

Related: Chainalysis estimates $457B in taxable crypto activity, says CARF misses most

Where the basis is not reported, taxpayers should use their own records to complete their tax return, but that gets complicated quickly when crypto assets move frequently between platforms.

So, you might buy Bitcoin on one exchange, transfer it to a private wallet, move it to another exchange and sell it there — and the second exchange doesn’t have the information showing what you originally paid.

About Form 1099-DA. Source: IRS.gov

“The full transaction history from the day the account opened” is what taxpayers need from exchanges, Herbst says. That includes trades, fees, deposits, withdrawals and transaction identifiers, such as the wallets involved.

He says basis follows the asset as it moves between platforms, which means one missing piece of transaction history can affect a gain calculated years later on another exchange.

More data for the IRS, more work for taxpayers?

Andrew Gordon, executive director of Digital Asset Tax Action, says taxpayers are “constantly” struggling to reconcile 1099-DAs with their own records during the 2025 filing season.

He says most crypto tax software lacks tools to import and reconcile 1099-DA information, and the few that do still require manual entry because brokers did not provide the 2025 forms in a machine-readable format.

For active traders, Gordon says, manually entering the information can mean hundreds of individual entries. He argues that brokers should provide a machine-readable file alongside every 1099-DA so the information can flow directly into tax software.

He also says exchanges should maintain complete transaction histories, including acquisition dates, amounts paid, fees and transfers.

Gordon’s concern is that the IRS’s increased visibility doesn’t translate into a complete tax calculation for the taxpayer.

“The 1099-DAs only reported proceeds in 2025, and proceeds reporting gives the IRS visibility it did not previously have;” however:

“Visibility without basis produces the zero-basis problem.”

Taxpayers shouldn’t blindly copy the numbers from a 1099-DA onto their tax return. Duca advises them to compare it against their complete transaction history rather than automatically accepting the form’s figures:

“The IRS expects your return to reflect your actual gains and losses, not necessarily what’s printed on a form that the exchange may have worked out incorrectly.”

Will 2026 make things easier?

While crypto taxpayers are still grappling with the 2025 filing season, more changes are coming down the line.

From 2026, brokers must generally report cost basis for covered digital assets, which will give taxpayers more information to calculate their gains and losses. However, assets transferred to a broker from another exchange or wallet can still fall outside those requirements.

So, the IRS may know more about your crypto trades, but when it comes to working out what you owe, you still need to keep the receipts.

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