- US exchanges are now issuing Form 1099-DA under new IRS reporting rules
- Cost basis often can’t be reported accurately, creating risk for users
- Confusion and honest mistakes may define the first year of enforcement
This week marks a major shift for US crypto holders, and it’s not the kind of shift most people are prepared for. Exchanges like Coinbase are now issuing Form 1099-DA under new IRS rules, effectively ending the era where most retail users self-reported quietly, inconsistently, or not at all. On paper, it sounds like crypto is finally being treated like equities.
In practice, it breaks immediately. Crypto doesn’t live on one platform. People move assets between wallets, bridges, centralized exchanges, and DeFi protocols constantly. Treating this like stock trading ignores how crypto actually works, and it forces a reporting framework built for TradFi onto an ecosystem that never behaved that way.
Exchanges Can Report Proceeds, Not the Most Important Number
The core issue is cost basis. Exchanges can report what you sold and how much you received, but they often cannot report what you originally paid. If Bitcoin moves from cold storage onto an exchange and then gets sold, the exchange has no visibility into the original purchase price. That missing number is the difference between accurate taxes and a tax nightmare.
According to Awaken Tax, more than half of surveyed US crypto holders are worried they’ll be penalized this year. And that fear isn’t irrational. Awaken Tax founder Andrew Duca summed it up bluntly: exchanges are sending forms that look official, but they lack the most important detail. The paperwork may look clean, but the data underneath it is incomplete.
The IRS Is Quietly Shifting the Burden Onto Retail
Under the new system, the IRS expects users to manually patch missing data using Form 8949. That assumes people have perfect records across years of transactions, wallet transfers, and DeFi activity. It also assumes they understand tax accounting rules most retail traders have never been taught.
Compliance was already messy in crypto. This approach tries to force it higher overnight, not through clarity or better tooling, but through pressure. The result won’t be mass enforcement right away. It will be mass confusion, with honest mistakes being treated like negligence.
This Isn’t a Crackdown, It’s a Rushed Shortcut
The scary part is that this doesn’t feel like a deliberate crackdown. It feels like a rushed shortcut, one that tries to bolt TradFi reporting standards onto crypto without acknowledging how fragmented the ecosystem is. The rules may increase reported proceeds, sure, but they also dramatically increase the odds of accidental misreporting.
For the first year, confusion will likely be the defining feature, not enforcement. Until reporting systems reflect real crypto behavior, tax season is going to feel like walking through fog. And retail holders are the ones most likely to pay the price for it.
