The U.S. Treasury Wants to Change Tax Regulations for Cryptocurrency Investments
Cryptocurrency investors should expect potential changes to the digital currency landscape soon. This comes as the treasure recently proposed new reporting roles for cryptocurrencies.
The Announcement
The IRS and the U.S. Department of the Treasury announced the proposed regulations. The proposed tax reporting regulations would affect non-fungible tokens and other types of digital assets in addition to cryptocurrency. Investors would have to start reporting 2025 transactions as of January 2026 when filing their taxes.
The proposal includes all the obvious connections to cryptocurrency and centralized and decentralized crypto exchanges. It would also affect some online wallets and cryptocurrency payment processors.
It Would Require Broker Reporting
Currently, brokers must report investor transactions for stocks, bonds, and other traditional investments. The proposed regulation would also require them to report on these cryptocurrency transactions. They would do so on Form 1099-DA.
As is the case with other investments, brokers would have to send Form 1099-DA to investors and the IRS in January. This form would cover the investors’ transactions for the past year. The proposed regulation would begin with the 1099-DA for 2025, released in January 2026.
Importantly, the final regulations may change, so investors should regularly check for updates or consult with a tax accountant.
Reasons for the Changes
The proposed changes to cryptocurrency tax reporting come as part of an effort to reduce cryptocurrency tax evasion. Officials say they want to “close the tax gap” of cryptocurrency.
Crypto investors may remember a similar announcement several years ago. Originally, this new reporting rule was going to go into effect in 2024. In December 2022, however, the IRS decided to delay the reporting rule.
You Should Still Report Crypto Annually
The IRS is clear that just because you don’t receive a reporting form doesn’t mean you don’t have to report your crypto income. Investors are already required to report cryptocurrency activity when filing their taxes. The difference will be that brokers must send investors the 1099-DA once this rule goes into effect.
If you fail to report your crypto transactions on your taxes, you could face consequences or fines. If you aren’t sure how to report the transactions, ask your tax or cryptocurrency accountant for assistance.
Consider Reviewing Past Returns
Experts also suggest that investors look at their past returns and consider amending them if necessary. If you had cryptocurrency activity in the previous years but didn’t report it, you should strongly consider going back and doing so.
That is because the IRS could potentially have access to past cryptocurrency investment information as well. At the very least, the agency will have access to your upcoming crypto transactions, which can indicate to the IRS that they missed something in the past.
As a rule of thumb, it is much better to voluntarily amend your past tax filings to report undisclosed income than to wait for the IRS to discover your errors or omissions. While they may not notice the errors or omissions, if they do, the fines and penalties may be higher than if you disclose them yourself.
What to Do in 2025 and Beyond
Even though your crypto broker will file a 1099-DA to report your 2025 transactions, you should keep careful records yourself. This lets you confirm that there are no errors. Given the newness of cryptocurrency, there is a higher risk of reporting errors on your 1099-DA than on traditional investment reports. Experts suggest you trust the report you receive but still verify it.
Conclusion
Starting in January 2026 for the 2025 tax year, cryptocurrency brokers must report activity to the IRS and investors on Form 1099-DA. Before then, you are still responsible for reporting your crypto income and activity. It’s also prudent to amend past returns if the information about your cryptocurrency activities isn’t accurate.
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