Many crypto investors’ transactions this year will be reported to the IRS for first time
CNN
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In the next few months, most Americans will be focused on getting their tax documents together to complete their 2024 returns.
But for anyone who buys and sells digital assets like bitcoin, it is worth knowing that 2025 will mark the first tax year that your crypto transactions will be subject to third-party reporting requirements, meaning information on them will be sent to the IRS, if your transactions are conducted in a custodial account on a centralized crypto trading platform, such as Coinbase or Gemini.
The companies that will be on the hook to provide the reporting are "brokers who take possession of the digital assets being sold by their customers. These brokers include operators of custodial digital asset trading platforms, certain digital asset hosted wallet providers, digital asset kiosks, and certain processors of digital asset payments (PDAPs)," the IRS noted on its site.
It's easy to wonder if maybe it's time to consider investing in bitcoin. But the answer isn't an easy yes or no.
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The broker will maintain information on your purchases and sales of crypto in your account throughout the year and report it on a new form, the 1099-DA. Once complete, that form will be sent to you and the IRS in early 2026.
Just like information from other 1099 forms you may get, e.g., for your dividend and interest income, or for your capital gains and losses, information from the 1099-DA must be included on your 2025 income tax return, which you'd file next year. If you don't include it, the IRS will notice because it will have the information in hand and use it to assess your tax obligation.
When it comes to cost basis, which is the price at which you buy a crypto asset and is used to determine your taxable gains, if any, when you sell it, brokers actually won't have to report your cost basis information until tax year 2026, said Jessalyn Dean, vice president of tax information at Ledgible, a crypto tax software provider.
What if you don't trade on centralized custodial exchanges?
The timeline is slightly different if you maintain custody of your crypto assets and trade them on decentralized platforms in peer-to-peer (or wallet-to-wallet) transactions, such as Uniswap and Sushiswap. These front-end service providers don't hold your assets for you, they just facilitate your exchanges.
Third-party reporting requirements for those transactions won't go into effect until 2027, Dean said. While those decentralized platforms will have to report the gross proceeds on your transactions, they will not report cost-basis information because they won't necessarily have access to the price at which you originally bought a digital asset.
How about bitcoin ETFs?
If you own one of the recently created spot bitcoin exchange-traded funds, there will also be third-party reporting this year. The ETF provider will issue you either a 1099-B or a 1099-DA, Dean said.
And that reporting won't just include proceeds from your sale of shares, but may include any activity in the ETF that creates a taxable event for shareholders, which is the same issue affecting shareholders in ETFs in commodities like gold.
Even though the ETF buys and holds the given asset (e.g., bitcoin or gold) for the long term, the ETF manager likely needs to sell some every year to pay expenses. When it does, "there's a gain or loss on the sale inside the fund and investors will have to calculate their applicable portion of that," Dean explained.
That's why she advises anyone with a bitcoin ETF to seek guidance from a tax adviser on that issue.
Third-party reporting is not about new taxes
Third-party reporting requirements do not represent a new tax on digital asset investors. They represent a new tax compliance mechanism to help ensure you pay what tax you owe, Ledgible CEO Kell Canty said.
Or, as the US Treasury put it last month in a statement, with the new 1099-DA, digital asset owners will "be reminded that those transactions are taxable, thereby reducing the number of inadvertent errors or noncompliance on the taxpayer's federal income tax returns and saving taxpayers time and money during the filing process."
And they'll also be a good reminder, Canty noted, "If you haven't been reporting, you need to report."
