Coinbase & the IRS: What You Need to Know in 2025

2025 Regulatory Changes: What’s New This Year

New rules can feel abstract, so here’s how to think about 2025 before we unpack the specifics.

The IRS has finalized rules that put crypto brokers on a clearer, stock-style reporting path, centered on a new Form 1099-DA for sales and exchanges. For 2025, imagine getting a store receipt that shows the total amount you sold for, that’s “gross proceeds.” Starting in 2026, brokers begin adding the itemized details, which include your cost basis and resulting gain or loss, much like a full invoice.

With that mental model in place, let’s look at exactly what starts, what’s included, and how the transition relief works.

Form 1099-DA Begins

Starting with transactions on or after Jan. 1, 2025, U.S. “digital asset brokers” (for example, centralized exchanges) must report customer sales and exchanges on the new Form 1099-DA. This requirement comes from the IRS/Treasury final regulations implementing the 2021 Infrastructure Act (see Section 80603: “Information reporting for brokers and digital assets.”). If you’re outside the U.S., this rule may still affect you if you use a U.S. platform that treats you as a reportable customer. Think of it like a stockbroker reporting, as crypto platforms are now on a similar schedule.

What’s in 2025 Reporting

For calendar year 2025, 1099-DA will show gross proceeds only (how much you received when you sold or exchanged), not your cost basis. Beginning in 2026, brokers must add basis and gain/loss for covered digital asset lots (similar to covered securities in stocks). Until then, taxpayers still compute gains/losses themselves (e.g., via Form 8949/Schedule D).

Transition Relief & Timing

The IRS kept the 2025 start date, but provided transition relief via Notice 2024-56 and later extended it in 2025 with Notice 2025-33. Practically, you’ll receive your 1099-DA for 2025 trades in early 2026, because brokers must furnish recipient statements by Feb. 17, 2026 (unless an allowed extension applies).

If you’re picturing a timeline, think: rules finalized in 2024 → first 1099-DA arrives for 2025 activity during the 2026 tax season.

Backup Withholding (Through 2027 Relief)

Normally, if a broker doesn’t have a correct Taxpayer Identification Number (TIN) on file, it must backup withhold on reportable proceeds. For digital assets, the IRS granted step-by-step relief:

• No backup withholding required on 2025 transactions
• Limited relief for 2026 when the broker uses the IRS TIN Matching Program, and
• Additional relief into 2027 (e.g., when TIN-matched or when promptly liquidating withheld digital assets to cash), per Notice 2024-56 and the update in Notice 2025-33

For customers, this means ensuring your name/TIN exactly matches IRS records to avoid future withholding friction. For a practitioner overview, see KPMG’s summary of the extended relief.

We suggest you check out our detailed review of Coinbase to learn a lot more about the platform.

What Coinbase Reports (and When You Get Forms)

With U.S. broker reporting now rolling out, Coinbase’s tax documents help you align what you file with what regulators receive.

Note: By rule, 1099-MISC recipient statements are due by Jan. 31 each year to taxpayers (IRS reminder). For 1099-DA/1099-B, recipients typically receive statements around mid-February in the following tax season.

1099-DA (Digital Assets)

Starting with the 2025 activity, Coinbase will issue Form 1099-DA for your sales and exchanges on the platform. The requirement stems from Treasury/IRS final regulations, which phase in reporting: gross proceeds for 2025, then basis and gains/losses for covered lots from 2026 onward (Federal Register final regulations). A copy of 1099-DA is furnished to you and also to the IRS so they can match returns. You’ll download your forms in Coinbase Taxes under Documents.

1099-MISC

If you’re a U.S. person and you earned $600 or more in Coinbase-paid income (e.g., staking rewards, incentives, referrals), you’ll receive Form 1099-MISC. Issued forms are available in the Documents section of your Coinbase Tax Center.

1099-B (Futures)

If you traded crypto futures via Coinbase’s derivatives venue, you’ll receive Form 1099-B for that activity, separate from 1099-DA and 1099-MISC.

Non-U.S. Customers

If your account is with a non-U.S. Coinbase entity, you won’t receive U.S. 1099 forms. Instead, you can download and export your transaction history from Coinbase Taxes to support your local tax return.

Exactly What Data Is Shared with the IRS

At a high level, Coinbase (as a U.S. broker) shares two categories of information with the IRS:

1. Who you are
2. What taxable activity you did on the platform

Here’s what that looks like in practice, and what it doesn’t automatically include.

Identity (you)

Brokers collect your legal name, address, and Taxpayer Identification Number (TIN), typically provided via Form W-9, so the IRS can match any forms issued to your return.

Transactions (what you did)

For sales and exchanges, brokers report gross proceeds on Form 1099-DA (starting with 2025 activity). Separately, certain income you earn from the platform, like staking rewards, incentives, or referral bonuses, can be reported on Form 1099-MISC.

Backup withholding (if details don’t match)

If payee information is missing or incorrect, a broker may be required to withhold tax from your payouts under backup withholding rules. This often starts with a name/TIN mismatch notice to the payer (CP2100/CP2100A) under the IRS “B” Notice program. In plain terms: make sure the name on your account exactly matches the TIN you provided to avoid preventable withholding.

Not automatic by default:

• Complete cost basis across wallets/exchanges: Brokers report proceeds first; your full cost basis may live across multiple platforms or self-custody. You still need to report digital-asset transactions and reconcile based on your return.
• Self-custody wallet activity: If a service does not take possession of your assets (for example, using a non-custodial wallet), it isn’t covered by the current broker reporting framework; rules for non-custodial/DeFi brokers are addressed separately in later rulemakings, per the IRS’s final-regs summary.

Your Tax Obligations as a Coinbase User (U.S.)

Exchanges can send you forms, but you’re the one who must add everything up: the sales, swaps, and any crypto income, and report it in the right places.

Capital Gains/Losses

Any time you sell or exchange crypto, list the transaction on Form 8949 and then carry the totals to Schedule D. Beginners often ask how to choose which “lot” they sold when they have multiple buys. The IRS lets you use specific identification or FIFO; see Publication 551 for the basics on identifying lots and basis methods in plain English.

Ordinary Income

Crypto you earn (for example, staking rewards, referral/learn bonuses, or certain airdrops) is generally ordinary income and belongs on your return for the year you received it. The IRS highlights income from staking/earn programs in its filing reminders; see this IRS notice for examples and where it fits on your tax return.

Transfers

Moving crypto between wallets you control isn’t a taxable event, but you still need clean records so your cost basis follows the coins. The IRS confirms that simply holding or transferring between accounts you own does not, by itself, trigger reporting. Check out the IRS training handout “Digital Assets: What Tax Pros Should Know” (head over to the “Check ‘No’” section).

Good practice: Record the date acquired, original cost, and any transfer fees so you can compute gain/loss when you eventually dispose.

Step-by-Step: Staying Compliant in 2025

Compliance is easier when you treat it like tidying a desk; gather everything in one place, sort it, record the numbers where they belong, and keep receipts you might need later. The steps below follow that order.

Step 1: Gather & Reconcile

Start by pulling your transaction history and, if needed, monthly statements from Coinbase to cross-check dates, amounts, and fees (transaction history, statements). If you also used other exchanges or self-custody, combine everything into one spreadsheet so your basis carries across wallets. Finally, confirm your profile details to avoid TIN/name mismatches (see Coinbase’s B-Notice explainer).

Step 2: Calculate Gains/Losses

Choose an accounting method that the IRS recognizes (e.g., FIFO or specific identification) and stick with it across the year. The IRS outlines the basics under capital gains and losses and the basis of assets. For each disposal, compute proceeds minus cost basis (including relevant fees) and prepare to list the lot on Form 8949 instructions. If you transferred coins between wallets, carry the original basis forward so the eventual gain/loss is correct.

Step 3: File correctly

Enter each reportable lot on Form 8949 and carry subtotals to Schedule D instructions. Include any ordinary income you earned (e.g., staking or bonuses) on your individual return per Schedule 1 instructions. If a payer issues a form after you file, you can correct your return by filing Form 1040-X.

Tools

Use software that can import 1099-DA and CSVs, edit or supply missing cost basis, and map transfers between wallets/exchanges. A clear audit trail (downloadable reports showing each calculation) is essential. Naming examples is fine (e.g., CoinLedger, Koinly, CoinTracking, TokenTax), but pick based on features and accuracy, and not marketing.

Read: Best Crypto Tax Software

Recordkeeping

Keep the “paper trail” behind your numbers, like trade confirmations, CSVs, statements, and form copies. The IRS’s recordkeeping guide suggests retaining tax records for at least three years, and longer for certain items. (see Publication 552). If you later discover missing information or receive corrected documents, amend with Form 1040-X.

Cost Basis Pitfalls to Avoid

Think of cost basis as the “price tag” that follows your coins. If that tag is missing or mixed up, your gains/losses won’t add up correctly. Here are the common traps and how to remain compliant.

Missing basis on incoming transfers

Moving assets from self-custody or another exchange without solid records can trigger unknown basis flags. Keep a lot-by-lot trail (date, quantity, fees), and use tools that support by-account or by-wallet accounting so your original basis carries over (see the IRS text script on wallet/account accounting).

Inconsistent lot selection across wallets

If you buy the same asset multiple times, mixing those lots without tracking can distort gains. See IRS Publication 544 for how to calculate gains and losses when you sell or exchange property. Choose one lot-selection method, such as First In, First Out (FIFO) or specific identification, and use it consistently for the year.

Income events with no starting basis

Airdrops and many staking/earn payouts are ordinary income when you control the coins; that value becomes your starting basis for a later sale (see Revenue Ruling 2019-24 and Publication 525).

Name/TIN mismatches (backup withholding risk)

If your account name doesn’t match your TIN, you could face backup withholding once the rules phase in. For the 2025–2027 transition and relief mechanics, see KPMG’s summary of Notice 2025-33, and the IRS overview Understanding your CP2100/CP2100A Notice.

IRS Enforcement, Audits & Penalties (What Triggers Scrutiny)

The popular question is, “What triggers IRS scrutiny?” Here are the common “red flags,” what the consequences can look like, and a brief history of how the IRS has gathered crypto data before.

What Draws Attention

• 1099 mismatches: If what the payers report doesn’t match your return, the IRS may issue a CP2000 notice proposing changes to clear up any underreported income.
• Big swings vs. income: Large gains with little or no reported income, or repeated losses that don’t fit your profile, could invite questions.
• High trading volume with no filings: Many disposals with no 8949/Schedule D can look like underreporting.
• Prior non-filing or late filing: A history of missing or late returns raises the risk of review.
• Criminal patterns: IRS-CI highlights crypto among recent high-impact cases (see IRS-CI 2024 highlights).

Penalties (civil and criminal)

Consequences range from civil accuracy-related penalties and interest to criminal charges in willful cases. Recent coverage underscores the government’s posture on non-reporting of crypto, including potential fines and prison exposure in egregious situations.

History of IRS Obtaining Crypto Data

Beyond matching forms, the IRS has used “John Doe” summonses to obtain customer records from platforms, like court-approved demands aimed at unknown taxpayers. For example, a federal court authorized a summons on SFOX, a crypto broker, to identify U.S. users for compliance inquiries (see DOJ press release). This history explains why consistent reporting today helps you avoid mismatches later.

Closing Thoughts

Crypto tax rules are clearer now, but they still ask you, the taxpayer, to keep good records and report accurately. If you used Coinbase in 2025, expect a 1099-DA showing gross proceeds for sales and exchanges, with basis and gain/loss reporting added from 2026. Income you earn on-platform (like staking rewards or bonuses) is usually ordinary income and may come on a 1099-MISC; futures activity is reported on 1099-B. Forms help, but they don’t replace your responsibility to list disposals on Form 8949 and carry totals to Schedule D, or to include any income on your Form 1040.

The practical approach is simple: gather your Coinbase reports and CSVs, add activity from any other wallets or exchanges, choose a consistent accounting method (FIFO or specific ID), and reconcile basis before you file. If something’s missing or wrong, fix the records and request corrections; then amend your return if needed. Name/TIN mismatches can cause withholding headaches later, so make sure your profile details are exact.

For readers outside the U.S., rules differ by country, so export your history and follow local guidance. Finally, remember that regulations continue to evolve. Check for updates each season so your return reflects the latest requirements.

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