IRS Finalizes Crypto Tax Reporting Changes For 2025 – Details

Key Takeaways

• The Internal Revenue Service (IRS) has finalized new guidance requiring brokers such as crypto exchanges to file 1099 forms starting January 1st, 2025.

• This initially excludes DeFi operations and non-hosted wallet providers, with separate rules coming in 2026.

• Regulations are still evolving, and specifics may change before implementation.

The Internal Revenue Service (IRS) has released the final version of its controversial “broker rule” guidance, the IRS Form 1099-DA, which could later affect non-custodial platforms.

In other words, crypto exchanges will be subject to the new rules, which will go partially into effect in 2025.

This article will walk you through the implications of these changes, what actions you need to take, when they come into effect, and most importantly, how to prepare for them.

What You Need To Know

The IRS announced that it will now require brokers to file 1099 forms starting on January 1st, 2025. Notably, this does not include DeFi operations and non-hosted wallet providers.

Moreover, reporting is also limited to stablecoin transactions and NFT activities. This will only affect brokers such as trading platforms, hosted wallet services, and digital asset kiosks. Some of the examples mentioned include Coinbase, Gemini, KuCoin, Kraken, and other crypto exchanges.

For non-custodial crypto businesses such as decentralized exchanges like Uniswap and unhosted wallet providers like Ledger or Trezor, the rules for these platforms will be coming in 2026.

What Does This Mean For You?

The 1099 form will only report proceeds; brokers will not report if your proceeds are less than $600, similar to the standard 1099 system that we currently have.

This does not go into effect until January 1st, 2025, so you won’t be doing much on this until the end of that year when you start working on your 2025 taxes.

Due to the complexity of how the basis is calculated, the brokers need to provide that information, and you will have to do your own reconciliation to determine net gains and losses that you have experienced, as that will not be provided on the 1099 form.

We already had an article about the proposed 1099-DA form, and some of our concerns there included a lot of the details that they were asking for. Naturally, brokers and exchanges will have all of your KYC information, which will be provided to the IRS.

Final Thoughts

Realize that all of these are in flux, and a lot of these things will change between now and the end of the year. It is worth noting that the IRS still needs to get a finalized 1099-DA form out, and they are still working on it to this day.

Crypto reporting is a moving target in light of the FIT21 legislation that did not get approved by the Executive Office of the President and many other crypto regulations that are going on right now. They are working to develop crypto reporting regulations that are sustainable for the exchanges and the reporting community, so things are likely to change over the next six months.

That said, we highly recommend that you contact a licensed professional in your particular area if you need help filing your crypto taxes.

Source