Coinbase Criticizes IRS Crypto Tax Form 1099-DA

Background on the IRS digital asset reporting rules

The IRS introduced Form 1099-DA in 2025 as part of an effort to bring cryptocurrency reporting closer to traditional financial tax standards. The form requires digital asset brokers to report gross proceeds from crypto transactions to both the IRS and customers.

The rule stems from the Infrastructure Investment and Jobs Act passed in 2021. That legislation expanded the definition of brokers to include cryptocurrency platforms and introduced mandatory reporting obligations.

Beginning with the 2025 tax year, exchanges such as Coinbase must provide Form 1099-DA to U.S. users who sell digital assets. The goal of the regulation is to reduce tax evasion in the cryptocurrency market while improving transparency for regulators.

Why Coinbase criticizes IRS crypto tax form 1099-DA

Coinbase criticizes IRS crypto tax form 1099-DA primarily because of its broad reporting requirements.

The company argues that the form may include transactions that are not actually taxable events. Examples cited include stablecoin swaps, small gas fees, and routine network transactions.

According to Coinbase executives, including Vice President of Tax Lawrence Zlatkin, the reporting framework may overwhelm users with unnecessary information. This could create confusion for retail investors who frequently interact with blockchain networks through small-value transactions.

How Form 1099-DA works for crypto users

Form 1099-DA functions similarly to tax forms used for stock trading. Digital asset brokers must report transaction proceeds from crypto sales and send the information to the IRS. Users also receive copies of the form to assist with tax filing.

However, for the 2025 tax year the form will only include gross proceeds. Cost basis information will not be included in the initial reporting phase. This means users must calculate their gains or losses independently when filing taxes.

Without automated cost basis reporting, some investors may struggle to determine accurate tax liabilities.

Impact on retail investors and small transactions

Coinbase warns that the rules could disproportionately affect retail investors. Many blockchain transactions involve very small values, such as network fees or stablecoin conversions. Under the current reporting framework, these activities may still appear on tax forms.

For users who conduct frequent transactions, the number of reported items could become extremely large. The exchange argues that this approach adds complexity without meaningfully improving tax compliance.

Coinbase response and planned tools

Despite its criticism, Coinbase is complying with the IRS requirements and has begun distributing Form 1099-DA to eligible users. The company also announced plans to introduce additional tools to help users manage reporting requirements.

Future updates may include cost basis tracking features and educational resources designed to simplify tax preparation. Coinbase indicated that cost basis reporting could be integrated in later tax years, which may reduce confusion around taxable gains.