Over Half of U.S. Crypto Investors Fear IRS Penalties Amid New Reporting Rules
Awaken Tax warns that IRS’s new 1099-DA reporting compels brokers to disclose crypto sales, leaving investors to fill missing cost-basis data via Form 8949 as compliance remains low.
A January 2025 Awaken Tax survey of 1,000 U.S. crypto holders revealed that more than half fear IRS penalties under new reporting rules. The IRS now requires brokers like Coinbase to issue Form 1099-DA for all digital asset sales and exchanges, aiming to curb tax evasion by automatically matching transactions with taxpayer filings. Awaken Tax founder Andrew Duca criticized the regulations as a “blunt instrument” that treats crypto like stocks despite complex wallet transfers and DeFi activity. Coinbase can only report proceeds, not acquisition cost basis, forcing investors to patch missing data using Form 8949. Current crypto tax compliance is under 20%, with the IRS targeting an increase to 80% in a year.
- Form 1099-DA: An IRS information return that digital asset brokers must file to report customers’ crypto transactions, listing proceeds from sales and exchanges.
- Cost Basis: The original value of a digital asset, including purchase price and acquisition costs, used to calculate capital gains or losses.
- Form 8949: The IRS form used by taxpayers to report sales of capital assets, including crypto, specifying proceeds, cost basis, and gains or losses.