2025 will mark the first tax year that crypto transactions will be subject to third-party reporting requirements. IRS will implement a third-party reporting system for crypto asset transactions on CEXs such as Coinbase and Gemini. According to reports , custodial account transaction information involving crypto assets will be synchronized to the IRS through Form 1099-DA and must be filled in the 2025 tax return. Notably, the timeline is slightly different if you opt to maintain custody of your crypto assets and transfer them to decentralized platforms for wallet-to-wallet transactions. These front-end service providers do not retain your assets; rather, they facilitate your exchanges. The relevant reporting requirements will be implemented in 2027 for P2P transactions on non-custodial wallets or DEXs such as Uniswap. However, they will only cover the total transaction amount, not the cost basis information. Third-party reporting to the IRS – Details Jessalyn Dean said that third-party reporting will be implemented this year. This is for those who possess one of the recently established spot bitcoin exchange-traded funds. The ETF provider will provide you with either a 1099-B or a 1099-DA. The reporting will not only cover the proceeds from your share sale, but it could also cover any activity within the ETF that generates a taxable event for shareholders. This is the same issue that affects shareholders in ETFs that invest in commodities such as gold. In addition, the ETF manager is likely required to sell a portion of the asset (e.g., Bitcoin or gold) annually to cover expenses. This is despite the fact that the ETF buys and holds the asset for the long term. Dean further explained, “There’s a gain or loss on the sale inside the fund, and investors will have to calculate their applicable portion of that.” Ledgible CEO Kell Canty said that third-party reporting requirements do not represent a new tax on digital asset investors. Instead, they represent a new tax compliance mechanism to help ensure that you pay what tax you owe. To that end, the US Treasury stated in a statement last month that the new 1099-DA will remind digital asset owners that their transactions are taxable. This will reduce inadvertent errors or noncompliance on the taxpayer’s federal income tax returns and save taxpayers time and money during the filing process. Who will be responsible for reporting The IRS website indicates that the entities responsible for providing the reporting are “brokers who take possession of the digital assets being sold by their customers. These brokers include custodial digital asset trading platform operators, certain digital asset hosted wallet providers, digital asset kiosks, and certain processors of digital asset payments (PDAPs).” This is how it will work. The broker will maintain information on the customer’s purchases and sales of crypto in the customer’s account throughout the year and report it on a new form — the 1099-DA. Once complete, that form will be sent to you and the IRS in early 2026. Let’s bring it closer to home. Information on the 1099-DA, like information from other 1099 forms you may receive, such as dividend and interest income or capital gains and losses. It must be included on your 2025 income tax return. If you do not include it, the IRS will notice since it will have the information and use it to calculate your tax obligation. According to Jessalyn Dean, vice president of tax information at Ledgible, brokers are not required to report their cost basis information until the tax year 2026. The cost basis is the price at which a crypto asset is purchased and is used to determine any taxable gains or losses when the asset is sold. Land a High-Paying Web3 Job in 90 Days: The Ultimate Roadmap
