TechFlow News, February 18: According to CoinDesk, Awaken Tax, a cryptocurrency tax platform, surveyed 1,000 U.S. digital asset investors at the end of January this year. The results showed that over half of respondents fear penalties from the U.S. Internal Revenue Service (IRS) due to new tax transparency rules.
The new rules require cryptocurrency exchanges such as Coinbase to submit “Digital Asset Broker Transaction Proceeds” forms (Form 1099-DA) to the IRS this week—marking a formal shift in cryptocurrency reporting from prior self-reporting to an automated reporting system. The rules aim to combat tax evasion and underreporting in the crypto space by granting the IRS access to exchange customer data, enabling it to cross-check broker-reported data against taxpayer filings.
However, Andrew Duca, founder of Awaken Tax, described the rule as a “blunt instrument,” crafted by legislators with limited understanding of the cryptocurrency industry. A core issue is that exchanges like Coinbase can report only the proceeds from digital asset sales, but cannot provide the tax basis information—i.e., acquisition price plus associated costs—required to calculate capital gains or losses. For example, if a user transfers Bitcoin held in a cold wallet to Coinbase for sale, Coinbase has no knowledge of the original purchase price, resulting in incomplete information on the Form 1099-DA submitted to the IRS. Duca noted that the responsibility to fill this gap ultimately falls on asset holders, who must manually supplement the missing details using the IRS’s updated Form 8949.
Duca also pointed out that current tax compliance rates for cryptocurrency assets remain extremely low—fewer than 20% of holders file in accordance with regulations—and the new rules are intended to significantly raise this rate within one year.
