This 12 months, we issued over 56 million Kind 1099-DAs (tax type 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 despite the fact that almost a 3rd of these kinds (18.5 million) had been for transactions value lower than $1. Over half had been for $10 or much less. Three out of each 4 had been for lower than $50.
These kinds weren’t despatched to classy merchants who made large returns from crypto. The overwhelming majority of the kinds are for staking rewards measured in fractions of a cent, small purchases, and routine exercise. Each single one generates a type that an actual particular person is now anticipated to know, reconcile, and report, or danger an IRS discover.
The issue just isn’t the expertise. It’s the tax code.
What it already prices Individuals to file their taxes
Earlier than digital belongings enter the image, the tax system already imposes a unprecedented compliance burden. Based on the Tax Basis, particular person tax returns alone value Individuals a mixed $146 billion in time and out-of-pocket bills.
Moreover, primarily based 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 Individuals say they don’t really feel ready to file.
For the greater than 55 million U.S. adults who now maintain digital belongings, there may be a further layer. Commonplace 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 high 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 had been reporting crypto taxes utilizing tax calculators or different software program, Kind 1099-DA simply brought about taxpayers a number of confusion because the kinds offered solely gross proceeds in a manner many didn’t perceive.
We acquired 1000’s of questions from purchasers attempting to know the Kinds 1099-DA, along with 1000’s extra inquiries given the difficulties for exchanges to provide these on the timeline laid out by the IRS and Treasury.
The dimensions of the issue: Kraken’s 1099-DA information
Here’s what Kraken’s personal reporting information reveals for the 2025 tax 12 months:
53.4% of all kinds had been for transactions of $10 or much less. 74.3% had been beneath $50. Solely 8.5% exceeded $600, the brink that triggers reporting in most different areas of the tax code comparable to transactions on a fee 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 handle 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 fee app. You may have triggered a taxable occasion.
You’re technically required to lookup the fee foundation of the particular Bitcoin you spent, calculate whether or not you had a acquire or loss on that fraction of a coin, and report it on Kind 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 comparable to this from reporting. A focused de minimis threshold wouldn’t be novel. It might simply catch America up.
And whereas present proposed tax laws does embody a de minimis provision, it solely covers fee stablecoins. It doesn’t cowl Bitcoin, probably the most broadly held digital asset in America, which is accepted by 1000’s of U.S. retailers.
A significant de minimis threshold, listed to inflation and paired with anti-abuse guardrails, would eradicate tens of millions of pointless kinds 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 might be 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 peculiar earnings in the mean 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 at the moment value.
That is phantom earnings and it’s a consequence of making use of guidelines written for dividends and wages to a basically completely different type of asset.
Congress ought to permit taxpayers to decide on when staking rewards are taxed: on the time of receipt (as as we speak) or on the time of sale, when the acquire 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 Individuals truly expertise it, as one thing they maintain fairly 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 Individuals, spanning each state, age bracket, and trade, who’re navigating a tax system designed earlier than digital belongings existed. Congress ought to act to make taxpayers’ lives simpler.
