Cryptocurrency Exchanges Reporting Gains to the Internal Revenue Service Create a Tax Nightmare

US Crypto Taxpayers Are Still Waiting on Incomplete 1099-DA Forms and Missing Exchange Records Before the October 15 Tax Extension Deadline

The first United States tax filing season under new crypto reporting rules has increased what the Internal Revenue Service can see about digital asset sales, but it has not made the taxpayer's job simpler. Brokers are now required to report gross proceeds from certain digital asset sales, while many 2025 forms do not include the cost basis needed to calculate gains and losses. An August survey by Awaken Tax of 1,000 United States crypto investors found that 21% of respondents who had filed, or planned to file a tax extension, were still waiting for information they needed from an exchange or crypto platform. A further one in five said their 1099-DA, the form brokers use to report certain digital asset sales, was incomplete or that they were unsure whether it accurately reflected their transactions. Taxpayers who filed for an extension have until Oct. 15 to submit.

Proceeds Reporting Gives Visibility, Not the Final Answer

For 2025, brokers generally reported how much an asset was sold for, but not how much the taxpayer originally paid. That leaves taxpayers to calculate their own gains and losses. Chris Herbst, managing director of CountDeFi tax reporting, told Magazine that for an active trader, the reported proceeds figure can be many times the real gain, because each sale is counted at full value with no cost against it. In a simple case, Bitcoin bought for $9,000 and sold for $10,000 produces a $1,000 gain. But a 2025 1099-DA could show the $10,000 in proceeds without the $9,000 basis, so taxpayers need their own records to fill the gap.

The problem becomes harder when digital assets move across wallets and platforms. A taxpayer might buy Bitcoin on one exchange, transfer it to a private wallet, move it to another exchange and sell it there, while the second exchange lacks the original purchase price. Herbst said the full transaction history from the day the account opened is what taxpayers need from exchanges, including trades, fees, deposits, withdrawals and transaction identifiers such as wallets. He said basis follows the asset as it moves between platforms, so one missing piece of history can affect a gain calculated years later on another exchange.

Late and Mismatched 1099-DA Forms Add to the Filing Burden

Tax professionals say the first season under the new rules is producing reconciliation problems before taxpayers even reach the gain calculation stage. Sharon Yip, founder of Crypto Tax Advisors, said her firm has found discrepancies between clients' 1099-DAs and the crypto tax reports the firm prepared. Some forms did not include all trades clients made during 2025, and exchanges used different formats for customer statements, she said. Some exchanges reported cost basis on certain trades but not others, even though basis reporting was not mandatory for 2025.

Yip also described a stablecoin example: one client had more than $300,000 in stablecoin trades on an exchange in 2025, but the exchange's 1099-DA showed less than $100,000 in total stablecoin proceeds. She said that mismatch makes it very confusing for recipients to reconcile a 1099-DA with the crypto tax report they should use to file their return.

Timing issues have also affected taxpayers. Andrew Duca, founder of Awaken Tax, said the firm saw customers receiving 1099-DAs relatively late in the filing season. Because the regulation is new, he said, many exchanges are still trying to figure it out. He pointed to Kraken, saying it did not send any forms to users until two weeks before the April 15 tax deadline. Duca also cited a Kraken 1099-DA from around the same period that shows no reported transaction information. Kraken did not respond to Magazine's request for comment.

Software Gaps and the Zero-Basis Problem

Andrew Gordon, executive director of Digital Asset Tax Action, said taxpayers are constantly struggling to reconcile 1099-DAs with their own records during the 2025 filing season. He said most crypto tax software lacks tools to import and reconcile 1099-DA information, and the few that do still require manual entry because brokers did not provide the 2025 forms in a machine-readable format. For active traders, that manual entry can mean hundreds of individual records, Gordon said.

Gordon argued that brokers should provide a machine-readable file alongside every 1099-DA so the information can flow directly into tax software. He also said exchanges should maintain complete transaction histories, including acquisition dates, amounts paid, fees and transfers. His broader point is that the Internal Revenue Service's increased visibility does not automatically translate into a complete tax calculation for the taxpayer. Because the 1099-DAs only reported proceeds in 2025, he said, proceeds reporting gives the tax agency visibility it did not previously have, but visibility without basis produces the zero-basis problem.

Duca said taxpayers should not blindly copy numbers from a 1099-DA onto their tax return. He advised them to compare the form against their complete transaction history rather than automatically accepting the form's figures. The Internal Revenue Service expects a return to reflect actual gains and losses, not necessarily what is printed on a form that the exchange may have worked out incorrectly, he said.

The Internal Revenue Service also says taxpayers must report digital asset income and gains or losses whether they receive a 1099-DA or not. The source material notes that a simple transaction can be straightforward, but the 2025 forms can leave out the missing cost basis needed to turn proceeds into a taxable gain.

Changes Coming in 2026 May Help, but Transfers Remain a Blind Spot

The reporting framework is still moving. From 2026, brokers generally must report cost basis for covered digital assets, which should give taxpayers more information to calculate gains and losses. However, assets transferred to a broker from another exchange or wallet can still fall outside those requirements. That means the 2026 rules may reduce some manual work for certain transactions, but taxpayers who move crypto between platforms can still face gaps.

The survey data, the form examples and the professional accounts show the practical result of the new regime: the Internal Revenue Service now receives more broker-reported sale data, while many taxpayers still need to build their own complete records to file accurately. The issue also comes amid broader crypto tax discussion. A related report says a United States House tax committee advanced a crypto tax overhaul in a 38-5 vote, while Chainalysis estimates $457 billion in taxable crypto activity and says the Crypto-Asset Reporting Framework misses most. For readers, the reported takeaway is not a forecast of what taxes will be, but a reminder that a 1099-DA is not a complete tax calculation and may be only one piece in a larger filing season.