This 12 months, we issued over 56 million Type 1099-DAs (tax kind required for reporting digital asset transactions) to the IRS, one for each reportable transaction our clients made in 2025. That’s what the regulation requires although almost a 3rd of these varieties (18.5 million) have been for transactions value lower than $1. Over half have been for $10 or much less. Three out of each 4 have been for lower than $50.
These varieties weren’t despatched to classy merchants who made large returns from crypto. The overwhelming majority of the varieties are for staking rewards measured in fractions of a cent, small purchases, and routine exercise. Each single one generates a kind that an actual particular person is now anticipated to know, reconcile, and report, or threat an IRS discover.
The issue shouldn’t be the expertise. It’s the tax code.
What it already prices People to file their taxes
Earlier than digital belongings enter the image, the tax system already imposes a unprecedented compliance burden. In response to the Tax Basis, particular person tax returns alone value People a mixed $146 billion in time and out-of-pocket bills.
Moreover, based mostly on IRS estimates and impartial filer surveys, the typical non-business filer spends about eight hours and between $128 and $300 on a regular return. Practically one in 5 People say they don’t really feel ready to file.
For the greater than 55 million U.S. adults who now maintain digital belongings, there’s a further layer. Customary tax software program doesn’t deal with crypto transactions, so many buyers want devoted crypto tax instruments that value $49 to $599 per 12 months on prime of their common submitting prices.
A typical lively holder can spend $250 to $500 yearly simply to remain compliant, earlier than counting the hours spent reconciling transactions throughout exchanges and wallets.
However right here is the place it will get even tougher for the typical taxpayer. In 2025, brokers like Kraken report gross proceeds however not value foundation. Whereas many taxpayers have been reporting crypto taxes utilizing tax calculators or different software program, Type 1099-DA simply brought on taxpayers lots of confusion because the varieties introduced solely gross proceeds in a approach many didn’t perceive.
We acquired hundreds of questions from purchasers attempting to know the Kinds 1099-DA, along with hundreds extra inquiries given the difficulties for exchanges to supply these on the timeline laid out by the IRS and Treasury.
The size of the issue: Kraken’s 1099-DA information
Here’s what Kraken’s personal reporting information exhibits for the 2025 tax 12 months:
53.4% of all varieties have been for transactions of $10 or much less. 74.3% have been underneath $50. Solely 8.5% exceeded $600, the brink that triggers reporting in most different areas of the tax code resembling transactions on a cost app like Venmo.
The hours taxpayers spend reconciling these micro-transactions, typically with incomplete information, generate prices wildly disproportionate to any income the IRS will acquire from them.
The excellent news is that some in Congress are working to handle this. Any tax reform that simplifies life for taxpayers ought to deal with these core points.
Repair One: an actual de minimis exemption
The idea is easy: a de minimis exemption that excludes small, routine digital asset funds from capital features reporting.
Think about you stroll right into a Steak ’n Shake and pay for a $7.99 meal with Bitcoin by a cost app. You’ve got triggered a taxable occasion.
You might be technically required to lookup the price foundation of the particular Bitcoin you spent, calculate whether or not you had a achieve or loss on that fraction of a coin, and report it on Type 8949. All for a hamburger and a few tallow fries.
The US is an outlier on this respect. The UK, as an example, applies an annual capital features allowance that successfully exempts small crypto transactions resembling this from reporting. A focused de minimis threshold wouldn’t be novel. It could simply catch America up.
And whereas present proposed tax laws does embrace a de minimis provision, it solely covers cost stablecoins. It doesn’t cowl Bitcoin, essentially the most broadly held digital asset in America, which is accepted by hundreds of U.S. retailers.
A significant de minimis threshold, listed to inflation and paired with anti-abuse guardrails, would eradicate thousands and thousands of pointless varieties whereas defending income integrity.
Congress has already established the regulatory framework for mainstream digital funds by the GENIUS Act, signed into regulation in July 2025. The tax code needs to be agnostic whether or not you’re paying with money, Bitcoin or stablecoins.
Repair Two: finish phantom earnings from staking
A big portion of these sub-dollar 1099-DAs are staking rewards: tiny fractions of tokens earned for serving to validate blockchain networks. Whereas the present regulation is unclear, the IRS takes the place that every reward is handled as odd earnings in the intervening time of receipt, valued at truthful market worth on that date.
Most individuals don’t promote staking rewards instantly. They hold staking. However they now owe taxes on worth they haven’t realized. If the token worth drops between receipt and submitting, the taxpayer owes tax on greater than the asset is presently value.
That is phantom earnings and it’s a consequence of making use of guidelines written for dividends and wages to a essentially totally different type of asset.
Congress ought to permit taxpayers to decide on when staking rewards are taxed: on the time of receipt (as at the moment) or on the time of sale, when the achieve or loss is actual and measurable. This might eradicate phantom earnings, dramatically cut back the quantity of micro-transaction reporting, and align staking with how most People truly expertise it, as one thing they maintain relatively than one thing they spend.
Kraken and different exchanges already preserve the transaction stage information wanted to help both reporting technique. The infrastructure exists; Congress merely must authorize the selection.
A bipartisan second for taxpayers
This isn’t about serving to crypto firms. It’s about 55 million People, spanning each state, age bracket, and business, who’re navigating a tax system designed earlier than digital belongings existed. Congress ought to act to make taxpayers’ lives simpler.
