The IRS is gearing up to revolutionize how it monitors and taxes cryptocurrency starting in 2025. Whether you’re a casual crypto enthusiast or a seasoned trader, these changes will affect you. Staying ahead of these regulations is critical—ignoring them could result in steep penalties or worse. Here’s a breakdown of what’s coming and how to prepare.

Introducing Form 1099-DA: The IRS’s New Crypto Tracker

Beginning in 2025, cryptocurrency brokers and exchanges must report transactions using a brand-new form, Form 1099-DA. This change is monumental, signaling a shift in how the IRS tracks digital assets.

• What Will Be Reported? Every taxable crypto event—selling, swapping, or cashing out—will now be tracked.
• When Does It Start? The IRS will expect these forms by January 2026, covering all 2025 transactions.

Why This Matters:
Previously, tracking gains and losses was largely your responsibility. Now, brokers will do it for you, giving the IRS a clear view of every transaction. Be prepared—failing to comply could lead to significant penalties.

New Reporting Demands for Brokers—and You

The IRS is stepping up its requirements for crypto exchanges and brokers, demanding detailed reporting on transactions:

• Gross Proceeds Reporting: Brokers must report every dollar earned from digital asset sales.
• Cost Basis Reporting: By 2026, exchanges must also disclose the original purchase price of assets, allowing the IRS to calculate your gains or losses.

Expanding the Net:
The definition of “broker” may now include decentralized exchanges and certain wallet providers. If you thought decentralized platforms were exempt, think again—they could also be required to report your transactions.

Cost Basis by Wallet: A New Layer of Complexity

Starting in 2025, you’ll need to calculate the cost basis for each wallet individually.

• What’s Changing? You can no longer group transactions across multiple wallets. Each wallet’s records must stand alone.
• Why It’s Important: Failing to track cost basis accurately could result in errors, penalties, or audits.

Pro Tip: Start organizing your records now to avoid scrambling when tax season arrives.

NFTs Are Officially on the IRS Radar

Non-fungible tokens (NFTs) are no longer flying under the radar. The IRS now treats NFTs like any other digital asset.

• What’s at Stake? Gains and losses from buying, selling, or trading NFTs must be reported. Ignoring this could lead to hefty penalties.

If you’re active in the NFT space, ensure your records are up-to-date.

Key Deadlines You Can’t Miss

The IRS is rolling out these rules in phases, but the clock is ticking:

• January 1, 2025: Centralized exchanges and payment platforms must begin reporting transactions.
• 2026: Mandatory cost basis reporting takes effect.

Take Action Now: Waiting until the last minute could result in costly mistakes.

Heightened Enforcement: The IRS Is Watching Closely

The introduction of Form 1099-DA signals an increase in IRS oversight:

• More Audits: With detailed transaction reports, the IRS can easily identify unreported gains or errors.
• Crypto Task Force: A dedicated team is now focused on enforcing compliance in the digital asset space.

The message is clear: the IRS is cracking down, so be diligent about your filings.

Familiar Rules, New Scrutiny

While some aspects of crypto taxation remain the same, don’t let that fool you into thinking nothing has changed:

• Crypto as Property: Digital assets are still taxed as property, with capital gains rules applying.
• Capital Gains Rates: Tax rates remain unchanged, but with new reporting requirements, expect the IRS to closely monitor accuracy.

The increased transparency means mistakes or omissions are more likely to be caught.

How to Prepare for the IRS’s 2025 Crypto Rules

Getting ahead of these changes is essential. Here’s how to ensure you’re ready:

1. Start Tracking Transactions Now: Organize all crypto activity, including sales, swaps, and NFT trades.
2. Track Cost Basis by Wallet: Begin separating records for each wallet to comply with new requirements.
3. Seek Professional Advice: Consult a crypto-savvy tax expert to navigate these complex changes.
4. Prepare for NFT Reporting: Treat NFTs like any other crypto asset—log every transaction.
5. Use Crypto Tax Software: Specialized tools can simplify record-keeping and ensure accuracy.

The Bottom Line: Don’t Get Caught Off Guard

The IRS’s upcoming cryptocurrency tax rules mark a turning point in how digital assets are regulated. From the introduction of Form 1099-DA to expanded broker definitions and NFT reporting, the IRS is diving deeper into the crypto world than ever before.

Take action now to protect yourself. Staying informed, organized, and proactive will help you avoid unnecessary penalties and keep you compliant in this evolving regulatory landscape.