Disclaimer: This article provides general information only and is not tax advice. For specifics on how these changes impact you, consult a tax professional.
Starting in 2025, the IRS is implementing sweeping changes in how it monitors and taxes cryptocurrency. Whether you’re a casual crypto user or a seasoned trader, these new rules are too important to ignore. Missing out on these updates could mean serious trouble with the IRS. Here’s everything you need to know to stay compliant and avoid getting caught unprepared.
1. New Form 1099-DA: The IRS’s New Crypto Tracking Weapon
In 2025, the IRS will require brokers and exchanges to report your crypto transactions on a brand-new form called Form 1099-DA. This isn’t just a simple update – it’s a game-changer for anyone dealing in crypto.
- What’s Being Tracked: This form will capture every taxable event in crypto – from selling, swapping, to cashing out. If you thought your crypto moves were under the radar, think again.
- When It Starts: January 2026 is when the IRS will expect these forms, covering transactions for the 2025 tax year. That means what you do in 2025 will be on their radar, so take this seriously.
Why This Is a Big Deal
Up until now, it was mostly up to you to track your crypto gains and losses. But with Form 1099-DA, brokers are doing it for you – and the IRS will know every move you make. Don’t risk getting blindsided.
2. Heavy-Duty Reporting for Crypto Brokers – and You
The IRS is cracking down hard on crypto exchanges and brokers, demanding much more detailed information than ever before.
- Gross Proceeds Reporting: Every dollar made from selling digital assets must be reported.
- Cost Basis Reporting: By 2026, brokers also have to report the original price (cost basis) of your assets, allowing the IRS to clearly see your gains or losses.
The Big Expansion: Who Counts as a “Broker”?
The IRS is widening its net by including not just centralized exchanges but possibly even some decentralized platforms and online wallets. So even if you use decentralized exchanges, be ready: they might now report your transactions too.
3. Wallet-Specific Cost Basis: Keeping Track Just Got Harder
Starting in 2025, you’ll have to calculate your cost basis (the original price you paid) separately for each wallet. This might sound like a small change, but it has big implications for anyone juggling multiple wallets.
- What It Means for You: If you were used to grouping all your crypto buys and sells together, those days are over. You’ll need to keep records for each wallet separately to stay compliant.
Don’t let this catch you off guard – failing to track accurately could lead to penalties.
4. NFTs Are Now in the Crosshairs
The IRS isn’t just focused on coins like Bitcoin and Ethereum anymore. It’s expanding its reach to non-fungible tokens (NFTs), which means these too will fall under strict reporting requirements.
What’s at Stake
If you buy, sell, or trade NFTs, the IRS expects you to report those gains and losses. Ignore this at your peril – NFTs now have the same tax rules as any other digital asset, and the penalties for non-compliance can be hefty.
5. Deadlines You Can’t Afford to Miss
The IRS is rolling out these rules in phases, but don’t think that means you have time to slack off. Here’s what you need to know:
- January 1, 2025: Centralized exchanges and payment platforms will have to start reporting transactions.
- 2026: Cost basis reporting becomes mandatory.
Don’t wait to get prepared. Missing these deadlines could mean getting caught up in a costly mess with the IRS.
6. IRS’s Eyes Are Everywhere: Expect More Audits and Penalties
These changes signal one thing loud and clear – the IRS is stepping up its enforcement. With Form 1099-DA, the IRS will be watching crypto transactions like never before.
- More Audits and Penalties: The IRS can now easily spot unreported gains or incorrect filings. Audits and penalties are expected to increase as the IRS zeros in on crypto tax compliance.
- Dedicated Crypto Task Force: The IRS has even created a special team to handle crypto cases, meaning they’re not taking this lightly.
7. What Stays the Same? Don’t Be Fooled!
While some things remain the same, don’t let that lull you into thinking everything’s business as usual:
- Crypto is Still “Property”: Crypto is still taxed as property, so capital gains rules apply.
- Capital Gains Rates: Tax rates for crypto haven’t changed, but with the new reporting requirements, you can bet the IRS will be checking for accuracy.
Even with familiar rules, the increased scrutiny changes the game. The IRS will have more information than ever, so be vigilant about staying compliant.
How to Get Ahead of the 2025 IRS Crypto Rules
Don’t wait until it’s too late. Here’s what you should do now to make sure you’re ready:
- Start Organizing Records Today: If you haven’t already, begin keeping track of all your crypto transactions. The sooner you start, the easier it’ll be.
- Track Cost Basis by Wallet: Begin separating cost basis calculations by wallet. Get into the habit now to avoid last-minute stress.
- Get Professional Help: These changes can be complex. Consulting a crypto tax expert could save you from big headaches (and penalties) down the line.
- Prepare for NFT Reporting: If you own NFTs, start logging your transactions now – they’re now just as taxable as any other crypto asset.
- Use Crypto Tax Software: Consider using software designed for crypto taxes. With the IRS’s increased attention, having accurate records could save you serious trouble.
Final Warning: Don’t Get Caught Unprepared
The IRS’s 2025 crypto tax rules are a major wake-up call for anyone in the digital asset space. From Form 1099-DA to the expanded definitions and reporting requirements, the IRS isn’t just dipping its toes into crypto – it’s diving in headfirst. Take action now to avoid getting caught out by these changes.
Disclaimer: This article is not tax advice. Please consult a tax professional for advice specific to your situation.
