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Exposed: What the IRS Wants From You on Crypto 1099 Forms in 2025
As the crypto market continues to grow, so does the importance of accurate and timely tax reporting. In a recent development, the IRS has made it clear that they are prioritizing enforcement when it comes to crypto assets, specifically focusing on the 1099 forms issued by exchanges and platforms.
In this article, we will delve into what the IRS wants from you regarding these forms in 2025 and beyond.
The shift towards increased enforcement began with the issuance of CP2000 letters due to reporting mismatches. The IRS has been flagging returns where there are inconsistencies between reported income and the information provided by exchanges on the 1099-MISC and other forms. This has led to penalties, fines, and even criminal prosecution for non-compliance.
To address this issue, starting in 2025, the IRS will be requiring platforms to use a standardized form, specifically the 1099-DA. This new form is designed to provide more complete and accurate data, reducing the likelihood of reporting mismatches and false notices.
Other forms may also apply depending on the type of crypto income earned. The 1099-MISC is used when there is freelance or contract work in crypto, while the 1099-INT may be necessary for DeFi platforms that classify earnings as interest income. Additionally, the IRS requires reporting on retirement account distributions from crypto holdings using the 1099-R.
The importance of accurate reporting cannot be overstated. Even if a platform does not issue a 1099 form, it is still essential to track and report all crypto transactions. This includes decentralized finance (DeFi) activities such as staking, swaps, lending, and wallet transfers that do not involve intermediaries.
To avoid potential penalties and fines, users must be proactive in maintaining detailed records of their transactions. This includes keeping a record of the date, fair market value, and cost basis for each transaction. Failure to report these activities can lead to severe consequences.
Even with 1099 forms issued by platforms, it is crucial to review all entries, correct discrepancies, and maintain backup documentation. The burden of proof falls on the taxpayer in case of an audit or CP2000 notice.
Source: https://coinchapter.com/exposed-what-the-irs-wants-from-you-on-crypto-1099-forms-in-2025/?utm_source=rss&utm_medium=rss&utm_campaign=exposed-what-the-irs-wants-from-you-on-crypto-1099-forms-in-2025
