In 2025, a significant change is coming for individuals involved in buying and selling digital assets like bitcoin. For the first time, crypto transactions will be subject to third-party reporting requirements, meaning that information on these transactions will be sent to the IRS. This will apply to transactions conducted in custodial accounts on centralized crypto trading platforms such as Coinbase or Gemini.
The companies responsible for providing this reporting are brokers who handle the digital assets being sold by their customers. These brokers include operators of custodial digital asset trading platforms, certain digital asset hosted wallet providers, digital asset kiosks, and certain processors of digital asset payments (PDAPs), as noted by the IRS.
Brokers will maintain information on purchases and sales of crypto throughout the year and report it on a new form, the 1099-DA. This form will be sent to both the individual and the IRS in early 2026. The information from the 1099-DA must be included on the 2025 income tax return, and failure to do so may lead to the IRS taking notice and assessing tax obligations.
Regarding cost basis, brokers will not have to report this information until tax year 2026. If individuals maintain custody of their crypto assets and trade on decentralized platforms in peer-to-peer transactions, third-party reporting requirements will not go into effect until 2027.
For owners of spot bitcoin exchange-traded funds, third-party reporting will also be required this year. The ETF provider will issue either a 1099-B or a 1099-DA, which may include any activity in the ETF creating a taxable event for shareholders.
These reporting requirements aim to ensure tax compliance and reduce errors or noncompliance on federal income tax returns related to digital asset transactions. It serves as a reminder for individuals to report their transactions accurately and seek guidance from tax advisers if needed.
