A Coinbase survey reveals widespread ignorance of Form 1099-DA requirements as the IRS signals aggressive enforcement against unreported crypto gains.
The Compliance Minefield
A bombshell survey from Coinbase and CoinTracker reveals that 61% of US crypto investors don't understand the new tax reporting requirements that took effect in 2025. The consequences of this knowledge gap are severe: criminal tax fraud penalties can reach $100,000 in fines and five years imprisonment.
What Changed
Form 1099-DA
Starting with the 2025 tax year, cryptocurrency exchanges must issue Form 1099-DA (Digital Asset) to both investors and the IRS for transactions exceeding $5,000. This is analogous to Form 1099-B for stock transactions.
The Critical Gap
Here's the catch: brokers are required to report gross proceeds but are not required to report cost basis to the IRS. This means investors must independently calculate their gains and losses — a task that's trivially easy for traditional stocks but enormously complex for crypto.
Why? Because crypto investors typically:
- Trade across multiple exchanges (centralized and decentralized)
- Execute hundreds or thousands of transactions per year
- Receive tokens through airdrops, staking, and DeFi yields — all taxable events
- Use DeFi protocols that don't issue any tax forms at all
"The IRS has given itself the data to know what you sold, but they're relying on you to prove what you paid. For most crypto investors, reconstructing years of transaction history is a nightmare." — Shehan Chandrasekera, CoinTracker Head of Tax Strategy
The Penalty Structure
| Violation | Penalty |
|---|---|
| Negligence (honest mistake) | 20% accuracy penalty on underpaid tax |
| Substantial understatement | 20–40% penalty |
| Civil fraud | 75% of underpayment |
| Criminal tax fraud | Up to $100,000 fine + 5 years prison |
The IRS has signaled it will pursue criminal prosecution for intentional crypto tax evasion, with several high-profile cases already in federal court.
What You Should Do Now
Immediate Steps
- Aggregate all exchange accounts using tax software (CoinTracker, Koinly, TaxBit, or ZenLedger)
- Track DeFi transactions — every swap, liquidity provision, and yield claim is a taxable event
- File amended returns if previous years were incorrect (voluntary disclosure reduces penalties)
Ongoing Best Practices
- Use a dedicated crypto tax CPA familiar with digital asset reporting
- Keep records of every transaction including wallet-to-wallet transfers
- Declare all income sources: staking, airdrops, mining, and liquidity rewards
The Bigger Picture
The IRS's 2026 enforcement push targets an estimated 21 million+ US crypto users. With Form 1099-DA data now flowing directly to the IRS, the era of "the IRS doesn't know about my crypto" is definitively over.
For compliant investors, this is actually good news — clearer rules mean less ambiguity. For everyone else, the window to get right with the IRS is closing rapidly.