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The IRS wants its money. But it’s not making it easy to figure out how much that is.
New reporting rules now force cryptocurrency exchanges to disclose gross proceeds from digital asset sales — but not the cost basis. No purchase price. No original acquisition cost. Just the sale number, sitting there, useless on its own. For millions of U.S. crypto investors, that gap between what the IRS sees and what taxpayers actually need to calculate their tax bill has turned this year’s filing season into something close to a nightmare.
A survey from Awaken Tax, run in August across 1,000 crypto investors who filed or planned to file a tax extension, put numbers to the chaos. Twenty-one percent were still waiting on information from exchanges. Another 20% weren’t even sure whether their Form 1099-DA — the form brokers use to report digital asset sales — accurately captured their transactions. That’s roughly one in five investors flying blind on a document that’s supposed to help them comply with federal law.
The 1099-DA Problem Nobody Warned Investors About
The Form 1099-DA is pretty much the centerpiece of the new reporting regime. Brokers send it out, the IRS gets a copy, and in theory everyone’s on the same page. Except the form often doesn’t include the cost basis — the original purchase price — which is the whole thing you need to figure out whether you made or lost money on a trade.
Chris Herbst from CountDeFi put it plainly: the IRS’s visibility into sales doesn’t actually reduce the burden on taxpayers to determine their real gains. Say a trader sells Bitcoin for $10,000. The 1099-DA shows that $10,000 sale. But if the $9,000 purchase price isn’t on the form, the taxpayer has to dig through their own records to prove they didn’t just pocket $10,000 in profit. It’s on them. Fully.
Sharon Yip of Crypto Tax Advisors has seen this play out with clients. She’s found real discrepancies between what clients have on file and what their 1099-DAs show — exchanges omitting certain trades, using inconsistent formats, or just not matching up with reality. In one case, a client had over $300,000 in stablecoin trades. Their 1099-DA? It showed less than $100,000. That’s not a rounding error. That’s a mess.
Late Forms, Manual Entries, and Kraken’s Two-Week Warning
Timing made things worse. Andrew Duca of Awaken Tax said some exchanges sent out 1099-DAs just two weeks before the April 15 deadline. Kraken was specifically named. Two weeks to reconcile potentially years of transaction history across multiple wallets and platforms — not really enough time for anyone running a complex portfolio.
And when the forms did arrive, they weren’t always complete. Missing transaction data. No machine-readable formats. Andrew Gordon from Digital Asset Tax Action was direct about it: most crypto tax software can’t easily reconcile 1099-DA data without painful manual entry. So investors end up doing it by hand, which is slow and error-prone.
Active traders have it worst. Every swap, every fee, every transfer between wallets potentially triggers a taxable event. When trades are spread across several exchanges and years of history, reconstructing a clean cost basis record from scratch is genuinely brutal. Each gap in the data creates a cascading problem — miss one acquisition price and the gain or loss calculation downstream falls apart.
The IRS hasn’t softened its position on this. Taxpayers are responsible for reporting digital asset income whether or not they receive a 1099-DA. The form is a reporting tool, not a get-out-of-jail-free card. No form, no excuse. You still owe accurate numbers.
Tax professionals are watching their clients struggle with exactly that reality. Records spread across Coinbase, Kraken, cold wallets, DeFi protocols — each platform handling data differently, none of them coordinating. The lack of standardized formats means the same trade can look completely different depending on which exchange is reporting it.
Starting in 2026, brokers will generally be required to report cost basis for covered digital assets. That should help, at least for assets held on centralized exchanges. But assets transferred between platforms may still slip through. A Bitcoin bought on one exchange and moved to a hardware wallet before being sold somewhere else? That cost basis could still get lost in transit.
For now, tax professionals say the only real defense is obsessive record-keeping — every trade, every fee, every transfer, logged and dated.
Kraken sent some 1099-DAs just fourteen days before the April 15 deadline.
Frequently Asked Questions
What does the IRS now require crypto exchanges to report?
Exchanges must report gross proceeds from digital asset sales via Form 1099-DA, but they are not yet required to include cost-basis information, leaving investors to calculate actual gains on their own.
Why did some crypto investors file tax extensions this year?
Per the Awaken Tax survey of 1,000 investors, 21% were still waiting on information from exchanges and 20% were unsure whether their 1099-DA accurately reflected their transactions, both common reasons for extension filings.
Why It Matters
The IRS's new reporting requirements highlight significant challenges for cryptocurrency investors, as the lack of cost basis data complicates tax compliance and accurate reporting. This gap could lead to increased confusion among millions of taxpayers, potentially resulting in errors in tax filings or disputes with the IRS. As regulatory scrutiny intensifies, the ability of crypto exchanges to provide comprehensive data becomes crucial, impacting investor confidence and market participation.
