Hold onto your hats, crypto enthusiasts, because the IRS is shaking things up starting in 2025! In a move that's sure to keep digital asset investors on their toes, centralized crypto exchanges like Coinbase and Gemini will now be under the IRS microscope with new reporting requirements.
Basically, these platforms will be required to spill the beans on all your crypto transactions with a shiny new form called the 1099-DA. This little piece of paperwork will detail every buy and sell of digital assets, letting both you and the IRS know exactly what's been going down in your crypto account. Forget to include this info in your 2025 tax return, and you'll be in for a surprise, because the IRS will already have it all on file!
Now, here's where it gets interesting: while this rule targets centralized platforms, those of you wheeling and dealing on decentralized platforms like Uniswap and Sushiswap have a bit more time to breathe easy. These peer-to-peer transactions won't join the reporting party until 2027. But remember, these decentralized platforms will only report gross transaction proceeds since they can't track the original purchase price.
Meanwhile, if you're dabbling in Bitcoin exchange-traded funds (ETFs), get ready for a paperwork party this year too. ETF providers will be sending out forms like the 1099-B or 1099-DA, which will cover not just sales but any taxable events in the fund. Jessalyn Dean, the tax whiz from Ledgible, suggests consulting with tax advisers to navigate these waters, as gains or losses could arise from the fund’s internal moves.
Oh, and here's a little nugget of relief: The IRS recently announced automatic relief for centralized finance users grappling with the upcoming tax rules, so no need for immediate panic. But come 2026, you'll need to choose an accounting method with your broker, or you'll get stuck with the default FIFO method, which could mean higher taxes.
So, buckle up and get ready for these new rules to take the crypto world by storm. Whether you're a seasoned trader or just dipping your toes in the digital waters, staying ahead of these changes will be key to smooth sailing in the crypto seas!
