IRS Crypto Tax Rules in 2025: What You Need to Know to Stay Compliant
The IRS has kicked off 2025 with new crypto tax rules that have left many investors and brokers scrambling to make sense of their compliance obligations. From wallet-specific tracking requirements to delayed broker reporting mandates, the evolving landscape introduces complexity—but also clarity—for taxpayers and exchanges. Here’s what’s changing, what’s staying, and how you can stay ahead of the curve.
IRS Revenue Procedure 2024-28: Wallet-Specific Tracking
One of the most impactful changes for individual taxpayers and companies is the requirement to track crypto transactions by wallet or account. Under Revenue Procedure 2024-28, crypto holders must:
Organize digital assets by wallet or account.
Track the cost basis of assets within those wallets separately.
Report dispositions (sales or trades) of assets by wallet or account for accurate capital gain or loss calculations.
Previously, many individuals used a universal accounting method, pooling all holdings into a single ledger regardless of wallet or location. This method allowed for simpler tax strategies such as FIFO (First In, First Out), but the new rules require a more granular approach.
Safe Harbor for Pre-2025 Transactions
Taxpayers had until December 31, 2024, to take advantage of a safe harbor provision, which allowed them to retroactively allocate old holdings to wallets and organize their cost basis. If you missed this deadline, it’s still a good idea to clean up your records—even if you don’t qualify for the safe harbor, a well-documented approach is invaluable in case of an audit.
Broker Reporting Delays: 1099-DA and Cost Basis Tracking
For brokers—primarily centralized exchanges or platforms that enable customers to buy and sell crypto—the IRS has delayed the implementation of their reporting requirements under the Infrastructure Investment and Jobs Act.
Original Broker Reporting Timeline
2025 Tax Year (Filed in 2026): Exchanges would report gross proceeds from asset sales.
2026 Tax Year (Filed in 2027): Exchanges would report gross proceeds in addition to capital gain or loss on sales, income from services such as staking-as-a-service, and the cost basis of new assets purchased on the platform. This change would generally, aligning crypto IRS (and customer) reporting outputs with outputs used by traditional securities brokerages (i.e. IRS Form 1099-B) standards.
Updated Broker Reporting Timeline
The IRS has postponed the broker reporting requirement by one year:
2025 Tax Year: No reporting is required from brokers on the IRS Form 1099-DA.
2026 Tax Year (Filed in 2027): Brokers will only need to report gross proceeds from customer’s sales on the IRS Form 1099-DA.
2027 Tax Year (Filed in 2028): Brokers will report on gross proceeds including any capital gain/loss and income events.
This delay gives exchanges more time to build infrastructure and processes for tracking and reporting cost basis—no small feat in an ecosystem where users frequently transfer assets between wallets and platforms.
Why Wallet-Specific Tracking Is Challenging
Unlike traditional securities markets, where brokers can easily track cost basis (only $USD in, and only $USD out), crypto’s digital property nature makes this more complex. Users can:
Transfer assets between personal wallets and exchanges.
Consolidate holdings from multiple sources, including mining, staking, and OTC trades.
Move assets on to a centralized platform without notifying the exchange of their original cost basis.
Because exchanges currently lack the cost basis history of customer deposits, this makes 1099-DA reporting nearly impossible. While brokers must adapt, individuals are now required to track their buy wallet, sell wallet, and transaction-specific details meticulously.
The Implications for Taxpayers
The #1 Tip for crypto taxpayers – In the coming years, IRS will have capital gain/loss and income data from exchanges. IRS will likely compare this 1099-DA data with the taxpayers Form 8949 data.
However, savvy users may also notice that the current Form 8949 does not have a field for “exchange, broker, or venue.” So, questions remain as to exactly how IRS plans to identify misreporting, but in any case, taxpayers should do their own reconciliation periodically and at year-end to ensure the trades in their chosen crypto tax software match the exchange’s 1099-DA reporting.
Increased Burden on Individuals:
For many, the new rules add complexity:
Tax Software Limitations: Until recently, most crypto tax software aggregated data across wallets into a single pool or “universal tracking method. New wallet-specific features are being implemented, but users must still identify each sale or acquisition as relating back to an owned-asset, with known cost basis, in the same wallet or account from which the sale was made.
Manual Tracking: Taxpayers with multiple wallets or years of transactions may need to review their historical data and organize it accordingly.
Opportunities for Simplification:
For taxpayers who primarily use a single exchange or wallet, these rules may eventually simplify reporting. In 2027, when broker reporting aligns with individual obligations, crypto tax reporting could resemble traditional brokerage reporting, with 1099-DA forms providing almost all the necessary details.
How to Stay Ahead of IRS Compliance
Start Tracking Now: If you haven’t already, begin tracking your transactions by wallet and account for the 2024 tax year. Use reputable crypto tax software with wallet-specific tracking capabilities.
Ensure “Flipping the Switch” Doesn’t Cause Historical Issues – Ensure you are using a tax software that can “lock” prior years/periods. If you simply flip the switch (change the software settings from Universal to By Wallet) without locking prior periods, the software will likely use this new method to recalculate gains/losses and income across all prior years. The result could be inadvertent misreporting of the current year's capital gains or losses.
Leverage Professional Help: Engage a crypto tax professional to ensure compliance and optimize your reporting. Software is a must for almost all taxpayers, but expert help ensures compliance while reducing the taxpayer headache. Expert CPAs and consultants will help organize old transactions, prepare disclosures, ensure record-keeping requirements are met, provide tax savings advice, and ensure unique transactions are reported fairly.
Understand the Timeline: While broker reporting is delayed, your individual obligations are not. Ensure you’re prepared to calculate capital gains and losses accurately, even without a 1099-DA.
Keep Records Organized: Develop a system to document wallet transfers, acquisition costs, and disposition values. This will reduce headaches during tax season and provide evidence in case of an audit.
The Bottom Line
The IRS’s new crypto tax rules mark a significant step toward clearer reporting standards, but they also place more responsibility on individuals and brokers. By understanding the changes, organizing your records, and seeking expert guidance, you can navigate this evolving landscape with confidence.
For more personalized guidance, click the talk to an expert. Whether you’re an individual taxpayer or a crypto business, our team of experts can help you establish trust, streamline operations, and stay compliant.
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Jeremy Nau, CPA
Author Bio:
Noah has more than 15 years of attest, legal, IT and regulatory compliance experience. Noah sets the strategy and oversees execution of strategy at The Network Firm. While Noah advises public blockchain and virtual currency clients on myriad industry-specific issues, his expertise lies in licensing, IT & Security matters as well as attest and assurance reporting for Exchanges, Asset-backed token issuers, lenders and blockchain and cryptocurrency startups.
Noah is a member of the American Institute of Certified Public Accountants (AICPA), Florida Institute of Certified Public Accountants (FICPA), and a former member of the California Bar Association and International Association of Privacy Professionals (IAPP). Noah has served in active roles for working groups with the AICPA and Chamber of Digital Commerce (CODC) since 2018 and hods a current seat on the Steering Committee for C4’s Cryptocurrency Security Standard (CCSS).
Connect with Noah Buxton on LinkedIn/Twitter for more expert advice.