A new wave of U.S. tax reporting requirements for digital assets is creating anxiety and confusion among American crypto holders, according to a recent industry survey. As the Internal Revenue Service begins implementing automatic reporting standards for crypto transactions, many investors say they fear penalties or filing errors during the upcoming tax season.
The shift centers on the introduction of Form 1099 DA, officially titled Digital Asset Proceeds From Broker Transactions. Under the updated framework, crypto exchanges are now required to report customer sales and exchanges of digital assets directly to the IRS. Platforms such as Coinbase must issue the new forms detailing proceeds from crypto transactions conducted during the previous tax year.
The policy marks a significant transition from self disclosure toward third party reporting, aligning crypto more closely with traditional financial assets like stocks and securities. Lawmakers designed the rules to improve transparency and reduce underreporting of digital asset gains. By allowing the IRS to compare broker submitted data with individual tax filings, regulators aim to narrow the crypto tax compliance gap.
However, a poll conducted by crypto tax platform Awaken Tax, which surveyed 1,000 U.S. digital asset investors in late January, suggests that more than half of respondents are worried about potential IRS penalties this year. Many cited confusion over how the new forms reflect their true gains or losses, particularly if they use multiple wallets or decentralized finance platforms.
Andrew Duca, founder of Awaken Tax, described the new reporting system as overly broad for a market that operates differently from traditional equities. Unlike stocks, crypto assets are frequently transferred between exchanges, private wallets and decentralized applications. When assets are moved from self custody wallets to centralized exchanges for sale, the exchange may not have access to the original acquisition price or tax basis.
As a result, Form 1099 DA typically reports only gross proceeds from transactions, not the original purchase price or associated acquisition costs. Without that cost basis information, the IRS form alone does not determine whether an investor realized a taxable gain or loss. Taxpayers must reconcile this data using Form 8949, where they are responsible for calculating and reporting accurate capital gains figures.
The complexity increases for active traders who engage in decentralized finance strategies, staking, liquidity provision or cross platform transfers. In these cases, reconstructing transaction histories and acquisition costs can require detailed recordkeeping and specialized software.
Industry analysts note that crypto tax compliance has historically lagged behind other asset classes. Regulators appear intent on closing that gap through expanded reporting requirements. While the new rules are intended to improve accuracy and enforcement, the transition period may be challenging for investors unfamiliar with detailed capital gains reporting.
As the IRS begins processing the first wave of 1099 DA forms, tax professionals are advising crypto holders to review transaction histories carefully, verify cost basis records and seek guidance if needed. With automatic reporting now in place, discrepancies between exchange data and individual filings could trigger closer scrutiny.
