cnn.com
IRS to Report US Cryptocurrency Transactions Starting 2025
Starting in 2025, US taxpayers using custodial digital asset trading platforms will have their crypto transactions reported to the IRS on Form 1099-DA; decentralized exchange reporting starts in 2027, while cost basis reporting is delayed until 2026; this is a tax compliance mechanism, not a new tax.
- What are the potential long-term consequences of the IRS's new reporting requirements on the cryptocurrency market and tax compliance?
- The 2027 reporting deadline for decentralized exchanges (DEXs) like Uniswap creates a tiered system for crypto tax reporting. While DEX users' gross proceeds will be reported, cost basis information will be unavailable due to the nature of these platforms. This distinction may increase tax complexity and compliance burdens for users of both centralized and decentralized platforms.
- What is the immediate impact of the IRS's new third-party reporting requirement on US taxpayers who trade cryptocurrencies on centralized platforms?
- Starting 2025, US taxpayers using custodial crypto trading platforms like Coinbase or Gemini will have their transactions reported to the IRS via Form 1099-DA, impacting millions of crypto investors. This will include information on purchases and sales, but cost basis reporting is delayed until 2026. Failure to report this information will result in IRS assessment of tax obligations.
- How does the timeline for reporting crypto transactions differ between centralized and decentralized exchanges, and what are the implications of this difference?
- The new third-party reporting requirement for crypto transactions aims to improve tax compliance, not introduce new taxes. This is a significant change to how digital assets are taxed in the US, impacting tax preparation and potentially leading to increased accuracy and revenue for the IRS. The initiative is intended to reduce tax evasion and errors by providing the IRS with transaction details.
Cognitive Concepts
Framing Bias
The article frames the new reporting requirements as a positive development, emphasizing the IRS's goal of reducing non-compliance. While this perspective is valid, it downplays potential negative consequences for taxpayers, such as increased complexity and compliance costs.
Language Bias
The language used is mostly neutral and informative. However, phrases like "the IRS will notice" and "If you don't include it, the IRS will notice" could be perceived as slightly threatening, though this is likely unintentional.
Bias by Omission
The article focuses primarily on the reporting requirements for crypto transactions and doesn't delve into the potential impact on taxpayers with varying levels of crypto investment experience or financial literacy. It also omits discussion of potential challenges in accurately tracking cost basis for complex trading strategies.
False Dichotomy
The article presents a dichotomy between custodial and non-custodial exchanges, but doesn't explore the nuances of different decentralized platforms or the complexities of hybrid approaches.
Sustainable Development Goals
The new reporting requirements aim to reduce tax evasion, which disproportionately affects lower-income individuals who may lack the resources to navigate complex tax laws. Increased compliance through third-party reporting can promote a fairer tax system.