Cryptocurrency, once the wild west of finance, is quickly becoming a more mainstream investment. As with any financial asset, this growth has caught the attention of the IRS. The rules for reporting crypto transactions have been evolving, and 2025 marks a major turning point with the introduction of Form 1099-DA.
For anyone who has dabbled in digital assets, this new form isn’t just a piece of paper; it’s a game-changer that demands your attention and careful record-keeping. Ignoring these changes could lead to a less-than-pleasant tax season, full of penalties and confusion.
So, let’s break down what the new Form 1099-DA means for you and how to stay on the right side of the IRS.
The Old Way: A Patchwork of Confusion
For years, reporting crypto on your taxes was a frustrating and sometimes complicated process. The IRS treated crypto as property, similar to stocks or real estate.
This meant every sale, trade, or even purchase with crypto was a “taxable event.” But unlike with traditional investments, there was no standardized form. Some exchanges might send a 1099-B or 1099-MISC, while others sent nothing at all.
This left investors to painstakingly track every single transaction across multiple platforms, often relying on third-party software or complex spreadsheets. I can tell you from personal experience—and from hearing countless stories from other investors—it was a headache.
This lack of standardized reporting created a significant compliance gap. The IRS knew people weren’t reporting all their gains, but it was difficult to audit without a clear paper trail. This led to a lot of guessing and a high risk of errors for even the most diligent crypto users.
The New Sheriff in Town: Form 1099-DA
Starting in the 2025 tax year (meaning you’ll receive it in early 2026), Form 1099-DA, Digital Asset Proceeds from Broker Transactions, will be the new standard. The IRS is now requiring digital asset brokers—including centralized exchanges, certain hosted wallet providers, and even some payment processors—to issue this form to their customers and to the IRS.
This is a monumental shift. The form will report crucial information about your transactions, including:
- Gross proceeds from sales or exchanges of digital assets.
- The date and time of each transaction.
- In some cases, the cost basis and whether the gain or loss is short-term or long-term.
For the first time, the IRS will have a comprehensive, standardized view of your crypto activity, making it much easier for them to match what you report on your tax return to the information they’ve received from exchanges. This closes the gap and puts the onus on you, the taxpayer, to ensure your records are accurate and align with the information provided by your brokers.
A New Rule to Live By: Wallet-by-Wallet Accounting
Beyond the new form, there’s another crucial change: the IRS is eliminating the “universal wallet” accounting method. Previously, some taxpayers would treat all their digital assets as one big pool, calculating the cost basis across all their wallets and exchanges.
Starting in 2025, you must use a wallet-by-wallet or account-by-account method. This means you have to track the cost basis of assets separately for each account you hold.
Let’s imagine you buy 0.5 ETH on Coinbase and later buy another 0.5 ETH on Binance. If you sell 0.5 ETH, you can no longer simply average out the cost of all your ETH.
You’ll need to use a specific accounting method—like First-In, First-Out (FIFO), Last-In, First-Out (LIFO), or Specific Identification—for each individual wallet to calculate your gain or loss. This makes meticulous record-keeping more important than ever.
A Call to Action: How to Prepare for the New Rules
So, what does this all mean for you right now? You need to become an expert in tracking your digital assets. Here’s your checklist:
- Gather Your Data: Collect all transaction history from every exchange, wallet, and platform you’ve used. This includes buys, sells, trades, staking rewards, mining income, and even transfers.
- Use Tax Software: Don’t try to do this manually. The complexity of calculating gains and losses across multiple transactions, especially with the new wallet-by-wallet rule, is too high. Crypto tax software can import your data, calculate your gains and losses, and generate the necessary tax forms for you.
- Understand Taxable Events: Remember, a taxable event isn’t just selling for U.S. dollars. It’s also trading one crypto for another (e.g., Bitcoin for Ethereum) and using crypto to pay for goods or services.
- Know Your Rates: Just like with stocks, your capital gains are taxed at different rates. If you held the asset for one year or less, it’s a short-term capital gain taxed at your ordinary income rate. If you held it for more than one year, it’s a long-term capital gain taxed at a much lower rate.
The new Form 1099-DA and updated reporting rules are a sign that cryptocurrency is maturing. While they add a new layer of complexity, they also bring much-needed clarity. By proactively managing your records and using the right tools, you can navigate these changes with confidence and avoid a tax season surprise.
How Biden’s Infrastructure Bill Affects Crypto Investors Via Increased Disclosure For Capital Gains Taxation
The president’s infrastructure bill has now been signed into law. While the focus is on hard infrastructure, there are various provisions added into the bill that has taxation impacts on cryptocurrency investors in the United States.
These provisions were included to cover some of the costs of all the infrastructure spending. This article covers how cryptocurrency investments are affected, which digital assets are impacted, and when the law goes into effect.
Cryptocurrency Ownership
Do you have investments in Cryptocurrency? You aren’t alone. Newsweek found that more than 46 million Americans, equivalent to 1 in 3 adults, own at least a partial share of one Bitcoin.
And this number is not going to get any smaller with the launch of new Crypto ETFs and the ongoing mania around all things Crypto. In fact, several digital coins and crypto platforms like Ethereum would be Fortune 500 companies based on market capitalization.
So, it’s not surprising that many Americans are scratching their head and wondering, “What does the infrastructure bill do?” and “How will this new legislation impact cryptocurrency investment?”
What Does the Infrastructure Bill Cover?
The 1.2 trillion-dollar bill is a bipartisan bill that mainly aims to address failing “hard” infrastructure. This includes new construction and maintenance on roads, bridges, airports, and seaports. This is a separate bill to Biden’s Build Back Better (BBB) bill that is still working it is way through Congress.
It also has notable provisions that will impact investors in digital assets (or infrastructure) such as cryptocurrency and nonfungible tokens (NFTs). The bill will have key impacts on crypto investment in the future.
How Will Biden’s infrastructure Bill impact Cryptocurrency investors?
Cryptocurrency investors will likely see the difference in legislation in these ways:
Changing the Definition of a Broker
The bill seeks to increase revenue by including new definitions and responsibilities for cryptocurrency participants. The infrastructure bill contained new classifications for a ‘broker’ among cryptocurrency network contributors.
Most of the entities classed as a “broker” will be exchanges. Think Coinbase and Robinhood. Any “broker” will be obligated to report their cryptocurrency profits in a type of 1099 form that is used for reporting equity/stock profits today. “Brokers” will also have to reveal the names and addresses of their customers.
Those who opposed this portion of the bill have concerns that the definition is too wide. They claim it will be punitive to those who are not truly brokers. Instead, it could impact network participants and expect them to act as node operators. This could burden them with requiring reporting information about crypto transactions. Often, they wouldn’t have the resources or information necessary to comply.
The U.S. Treasury Department commented on these concerns back in August. They claimed that it will not target non-brokers, such as miners, hardware developers, and others.
However, I expect this to be an ongoing area of contention for a while and given a major tenant of Crypto is being decentralized and anonymous – the blockchain is used to verify the transaction and not the person – this provision is going to come under a lot of scrutiny when the IRS releases detailed guidelines.
Investors May Have Overstated 1099-Bs
This still has implications for cryptocurrency investors who aren’t classed as a “broker”. As mentioned above, any exchange or “broker” is required to give a 1099-B form to the Internal Revenue Service (IRS) and the customer. The 1099-B is intended to allow the customer to then calculate any initial gains or losses. Afterward, they are sent on to the IRS in the form of a tax return.
The issue is that these 1099s will report inaccurate information in many cases. This is because exchanges don’t have the ability to report holdings in a self-custody wallet. Nor do they have the visibility to track activity in decentralized finance applications.
In the case of a self-custody wallet, crypto investors own their private keys and cryptocurrency holdings, as opposed to using an exchange. The tax situation could get complex if an investor uses both a self-custody wallet and exchange wallets.
Examples of overstated 1099-Bs
If a crypto inventor sent $100,000 in bitcoin from a self-custody wallet to their Coinbase wallet and sold that currency, the new law would mandate Coinbase to report the activity with a 1099 form.
This is problematic because Coinbase will report the investor sold $100,000 but can’t report the initial value paid by that investor because it did not occur in the exchange.
Crypto is taxed like stock investments. If you see a gain in the investment you must pay tax after you sell it. The tax rates for crypto gains are identical to capital gains taxes for stocks.
2021 Short Term Capital Gains Tax Rates (If you bought and sold Crypto in less than 1 year)
| Rate | Single | Married Filing Jointly | Head of Household |
| 10% | $0-$9,950 | $0-$19,900 | $0-$14,200 |
| 12% | $9,951-$40,525 | $19,901-$81,050 | $14,201-$54,200 |
| 22% | $40,526-$86,375 | $81,051-$172,750 | $54,201-$86,350 |
| 24% | $86,376-$164,925 | $172,751-$329,850 | $86,351-$164,900 |
| 32% | $164,926-$209,425 | $329,851-$418,850 | $164,901-$209,400 |
| 35% | $209,426-$523,600 | $418,851-$628,300 | $209,401-$523,600 |
| 37% | >$523,601 | >$628,301 | >$523,601 |
2021 Long-term capital gains tax rates (If you held Crypto for more than 1 year before sale)
| Rate | Single | Married | Head of Household |
| 0% | $0-$40,400 | $0-$80,800 | $0-$54,100 |
| 15% | $40,401-$445,850 | $80,801-$501,600 | $54,101-$473,750 |
| 20% | >$445,850 | >$501,600 | >$473,750 |
From the two capital gains charts above, you may be able to already see the issue with incorrect reporting.
For instance, if you bought cryptocurrency in the past year for $10,000 and sold them this year for $20,000. Combined with your salary income of $67,000 this totals a reported income of $87,000 due to the inaccurate 1099-B gain report. Without knowing you originally paid $10,000 they may simply report the gain to be $20,000.
This difference would require you to pay 24% instead of 22% of your short-term capital gains tax.
This also impacts long-term capital gains tax if you bought a large amount of cryptocurrency and sold it more than a year later. If your reported gain and regular income is lower than 40,000 then you would pay 0% however if the exchange simply reports the sales value then you could easily be put into the 15% bracket.
Shehan Chandrasekera is a certified public accountant and head of tax strategy at cryptocurrency portfolio tracker and tax calculator CoinTracker. She explains that many investors will need to seek help to resolve this issue, many are “going to get these 1099s and they’re going to panic, like, ‘Why do I have so much in gains? They will have to talk to an accountant or use a tool to reconcile it and report the right amount.”
Crypto Investors will have less Privacy
The bill includes a provision that develops the U.S. tax code called 6050I to incorporate digital assets.
Section 6050I demands that people who collect more than $10,000 in cash and equivalents file a report with the IRS. The report contains information about the trade such as who was involved, how much was paid. Beyond the names of the parties, it also includes their Social Security numbers. Its notable that non-compliance in reporting particulars about these payments is a felony crime.
The infrastructure bill provision would require similar from businesses and exchanges when they receive more than $10,000 in cryptocurrency.
An example of the privacy impact
Let’s say you made $60,000 in cryptocurrency markets and you want to buy a Tesla. Prior to the law being passed they would be required to collect your personal information. The new law requires the business to collect your name, address, Social Security number, and other information, so it can provide that for the IRS.
When Does the Infrastructure Bill into Effect?
Provisions will not take effect until January 2024. Before to establishing the legislation, the Treasury has said that it will perform research to understand who could be forced to comply and confirm those parties are indeed able of compliance.
The Bottom Line
The significant takeaways from the new bill are that it will change the reporting responsibilities of cryptocurrency network participants as more will be considered a “broker”. Investors may likely have an overstated or inaccurate 1099-B income that will have to be rectified with the IRS.
This is because the reporting of capital gains may be overreported due to exchanges reporting the price crypto was sold for rather than the gain as they don’t have the ability to know the original value if bought outside the exchange. Furthermore, the provisions in the bill are not set to take effect until early 2024.