Crypto investors are preparing for a more complex tax filing season in 2026 as new reporting rules take effect.
The changes stem from expanded Internal Revenue Service oversight and new disclosure requirements for digital assets.
A central development is the introduction of Form 1099-DA for crypto transactions.
The form requires brokers to report digital asset sales beginning with activity from 2025.
Early versions of the form focus on gross proceeds rather than full cost basis reporting.
Once Form 1099-DA goes out there’s nowhere to run nowhere to hide because exchanges are going to expose all your trades to the IRS.
Sharon Yip said.
Yip warned that missing cost basis data could trigger automated tax notices.
Jamison Sites of KPMG said the reported figures do not automatically equal taxable income.
The number on the Form 1099-DA is not taxable income.
Jamison Sites said.
The IRS is also shifting to wallet by wallet cost basis tracking.
Each exchange or wallet will now be treated as a separate ledger.
This change ends the universal pooling method used by many investors.
This has been a point of confusion for many taxpayers.
Jamison Sites said.
Investors must reconstruct historical records to comply with the new framework.
Revenue Procedure 2024-28 offered limited transitional relief for compliant taxpayers.
The IRS did provide a safe harbor but I don’t know how many crypto investors qualified.
Sharon Yip said.
Single exchange users face fewer challenges under the new rules.
Power users with DeFi and offshore exposure face heavier compliance burdens.
It’s impossible for a single exchange to determine cost basis for every sale.
Sharon Yip said.
Demand for crypto experienced tax professionals is rising sharply.
You certainly don’t want to wait until the last minute.
Jamison Sites said.
Loss harvesting remains possible but faces growing regulatory scrutiny.
Proposed legislation could extend wash sale rules to crypto.
Small transaction tax exemptions remain unapproved by lawmakers.
Retirement accounts are slowly expanding crypto linked investment options.
DeFi lending and receipt tokens continue to pose unresolved tax risks.
Large crypto donations still require qualified appraisals.
It’s going to be a huge mess this year unless people prepare now.
Sharon Yip said.