Your Coinbase 1099-DA just landed. It shows $240,000 in gross proceeds. Your bank account says $18,000. Both numbers are accurate. Welcome to crypto tax preparation.
The 2025 tax year is the first filing season where the IRS has real, standardized data on your trades. Not estimates. Not guesses. Actual transaction-level reporting, sitting in a database, being matched against your return. If you’ve been treating crypto taxes as optional, this is the year that stops working.
Here’s what you need to know before you file.
The Basics Haven’t Changed — Crypto Is Property
The IRS treats digital assets as property. That means every trade, sale, and exchange is a taxable event — calculated the same way as stocks. You have a cost basis (what you paid), a sale price (what you received), and the difference is either a gain or a loss.
If you own cryptocurrency for one year or less before selling, you’ll pay short-term capital gains tax on the profit, taxed at ordinary income rates — usually higher than long-term rates. Hold for more than a year, and the rates drop to 0%, 15%, or 20% depending on your income and filing status.
So that ETH you bought in January 2025 and flipped in March 2025? Short-term. The BTC you’ve held since 2023? Long-term if you sell it now. The holding period is not a technicality — it’s the difference between 37% and 20% on the same dollar amount.
What counts as a taxable event:
- Selling crypto for USD
- Trading one crypto for another (BTC → ETH is a sale of BTC)
- Spending crypto on goods or services
- Receiving staking rewards, mining income, or airdropped tokens
- DeFi income: LP fees, yield farming rewards, lending interest
What doesn’t trigger a taxable event:
- Buying crypto with USD and holding it
- Transferring crypto between wallets you control — if that’s the only action, the IRS says there’s no digital asset transaction. Keep the records, but there’s usually no taxable sale to report.
Form 1099-DA: What It Is, What It Isn’t
The most immediate development for filers this season is Form 1099-DA — the IRS’s new information return for digital asset proceeds from broker transactions, applying to transactions on or after January 1, 2025, with forms issued in early 2026.
Starting with 2025 transactions, covered US digital asset brokers — including most centralized exchanges — are required to report your crypto sales to the IRS. This means exchanges send information about your transactions to both you and the government at the same time, a notable shift from previous years.
The IRS receives a copy of every 1099-DA, meaning it can now match reported crypto proceeds against a taxpayer’s return much as it does with stock sales. Clients whose returns don’t reconcile with their 1099-DA data face CP2000 notices and potential audit exposure.
The Critical Catch: Proceeds ≠ Gains
Here’s the part that’s going to wreck a lot of DIY returns this year.
For 2025 transactions, custodial brokers are required to report gross proceeds only. Cost basis reporting is not required, though some brokers may report it voluntarily.
That means your 1099-DA might show $240,000 in proceeds without a single dollar of cost basis. If you bought that crypto for $220,000, your actual gain is $20,000. But the IRS’s copy of your 1099-DA only shows the $240,000. You have to supply the basis yourself — and you have to supply it correctly.
Do not prepare your tax return from the 1099-DA alone. Reconcile the form to your wallet and exchange records, document your cost basis and accounting method, and retain support in anticipation of IRS matching and automated notices.
What 1099-DA Doesn’t Cover
The form will not capture DeFi activity, non-custodial wallet transactions, or assets transferred between exchanges — so the 1099-DA represents a floor, not a ceiling, on what needs to be reported.
Liquidity pool deposits and withdrawals, yield farming rewards, token wraps, and NFT trades may create taxable events that won’t show up on 1099-DA. If you touched a DeFi protocol in 2025, your 1099-DA is incomplete by definition.
Also worth noting: the 1099-DA filing requirements generally apply to US brokers. Taxpayers transacting with foreign brokers — exchanges based outside the United States — may not receive a Form 1099-DA from that foreign broker. No form doesn’t mean no obligation.
Cost Basis: Per-Wallet Now, No Exceptions
The IRS has eliminated the “universal method,” which allowed you to treat the same asset across multiple wallets as one combined pool. You’re now expected to maintain cost basis records on a per-wallet or per-account basis.
This matters more than most people realize. Say you hold ETH across Coinbase, a cold wallet, and a MetaMask. Each pool is tracked separately. If you move ETH from Coinbase to MetaMask and then sell from MetaMask, exchanges can only report cost basis for assets they held from purchase to sale. If you moved crypto between platforms or wallets, you’re responsible for tracking what you originally paid.
Taxpayers can use specific accounting methods — FIFO (First In, First Out), LIFO (Last In, First Out), or HIFO (Highest In, First Out) — for cost basis calculations. HIFO tends to minimize gains in volatile markets because you’re selling the highest-cost lots first. The method you choose matters, and consistency matters even more.
Where Gains and Income Land on Your Return
For a 2025 return, crypto reconciliation is about matching the tax event to the right form. Capital asset sales generally go on Form 8949 and Schedule D; ordinary income from staking, mining, or forks may go on Schedule 1, line 8v; and crypto paid as wages or contractor income belongs on the forms that match the work relationship.
A concrete example:
- You bought 2 ETH in January 2025 for $6,400 and sold in November 2025 for $8,200. Short-term capital gain: $1,800 → Form 8949 / Schedule D.
- You staked SOL in 2025 and received $900 in staking rewards. Ordinary income: $900 → Schedule 1, line 8v (fair market value at receipt).
- You provided liquidity on Uniswap and earned $3,200 in fees. Ordinary income, and your LP positions likely created additional capital events on entry and exit.
Every bucket has a different rate. Mixing them up — or ignoring the DeFi bucket entirely — is how you end up with a wrong return and a CP2000 notice six months later.
What Still Doesn’t Have Clear Rules
Not everything is settled. The IRS has issued guidance on hard forks (Revenue Ruling 2019-24) and staking income (Revenue Ruling 2023-14), but plenty of DeFi activity remains in a gray zone — wrapping tokens, cross-chain bridges, protocol-native reward mechanisms, and certain LP structures don’t have definitive IRS positions yet.
Certain DeFi activities are not yet subject to broker reporting under current IRS rules, but may still be taxable. You’ll need to track and report these yourself.
“The IRS hasn’t said” is not the same as “it isn’t taxable.” File defensible positions, document your logic, and keep records.
The Extension Is Still on the Table
If you’re in the middle of untangling a year of multi-chain activity, for a 2025 return, the normal filing deadline was April 15, 2026, and an extension requested by that date generally gives you until October 15, 2026 to file. The extension buys you time to file — not time to pay. If you owe, that was due April 15.
The IRS says you must calculate basis before you file, so an extension is your chance to reconcile wallet history, exchange exports, and tax forms. Use it for that, not as a reason to do nothing.
The Honest Summary
Crypto tax preparation in 2025 is harder than it’s ever been — not because the rules are new, but because the IRS finally has the data to check your work. A 1099-DA with $240k proceeds and no basis isn’t a tax bill for $240k. But if your return doesn’t account for it correctly, the IRS will treat it like one until you prove otherwise.
If your 2025 activity included DeFi, multiple wallets, bridging, staking, or any CEX-to-self-custody movement, a self-prepared return from a 1099-DA import is probably missing taxable events.
This isn’t tax advice — your situation has variables a blog post can’t account for. If you’re looking at a complicated transaction history, consult a crypto-specialized tax professional before you file.
If that’s us, you know where to find us.
Need help with your crypto taxes? Mike Ring and the BCTP team handle the messy stuff — multi-chain DeFi, 1099-DAs that don’t add up, prior-year amendments. Free consult at cryptotaxprep.io or call 410-320-7348.
This isn’t tax advice. Talk to a professional about your specific situation.
