Millions of Americans prepare to file their tax returns for 2024 as the tax season nears. For those who are involved with cryptocurrency transactions, there is a major shift on the horizon.
In 2025, the IRS will require centralized cryptocurrency platforms such as Coinbase and Gemini (Internal Revenue Services) to directly report transactions to them.
The goal of this landmark initiative is to increase tax compliance, transparency and accountability in the rapidly growing digital assets market.
Under the spotlight: Centralized platforms
IRS announced that starting with 2025, platforms custodial in cryptocurrency will have to report transaction information on a 1099-DA, a new form.
The IRS and taxpayers will receive this form in the early part of 2026. It will contain detailed information about all purchases and sales made on these platforms.
The IRS has stated that brokers are required to adhere to certain rules. This includes custodial platforms, providers of hosted wallets, and payment processors who handle digital assets.
Brokers will not be required to disclose cost basis, the price at which a digital asset was purchased originally and used for calculating taxable gains until 2026. However, starting 2025 they must document gross profits from all transactions.
IRS stressed that these new rules do not introduce additional taxes, but rather are designed to ensure taxpayers comply with their current obligations.
The IRS already has the 1099-DA data, so if you fail to include it on your 2025 tax return there could be discrepancies.
A delayed timeline for decentralized exchanges
The timeline of compliance for crypto investors preferring decentralized platforms such as Uniswap and Sushiswap is not immediate.
The reporting obligations for third parties will not apply to these platforms until 2027, as they facilitate wallet-towallet transactions, without maintaining custody of assets.
When the new rules come into effect, platforms decentralized will no longer report transactions except for gross profits.
They will not be able to provide information on cost basis, as they don’t manage or store the digital assets of their users.
Jessalyn Dean, Vice-President of Tax Information at Ledgible (a company that develops crypto tax software), stressed in a CNN article the importance of keeping personal records for those who use decentralized platforms.
Taxpayers will be more responsible for calculating accurately their gains and losses if these exchanges do not provide comprehensive reports.
Bitcoin ETFs – Taxable events
Crypto tax reporting has become more complex with the rise of bitcoin ETFs.
ETF investors should also be aware they will receive a 1099B or 1099DA form from ETF providers.
Bitcoin ETFs, unlike traditional stocks can generate tax events without any direct sale by the investors.
ETF managers sell a portion of their holdings in order to pay for expenses. This results in gains and losses which are then passed to the shareholders.
Dean explained that “investors will need to determine their portion of the gain or loss if there is one on the sale within the fund.”
Dean recommends that bitcoin ETF investors consult with tax experts to make sure they are in compliance with the nuanced regulations.
Introduced by the IRS, the 1099-DA is a part of a larger effort to streamline tax compliance for digital assets.
Kell Canty, CEO of Ledgible, explains these reporting requirements as a way to improve transparency and reduce errors.
US Treasury has also echoed the sentiment. They claim that these changes are meant to simplify the tax filing process and remind taxpayers about their obligations.
The government wants to reduce administrative costs and close compliance gaps by ensuring more transactions are recorded.
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