IRS Crypto Tax Reporting Relief May Create Mismatch Between Broker Records and Taxpayer Information

The IRS has provided temporary relief for crypto tax reporting until the end of 2026, but this reprieve may lead to issues when reconciling taxpayer records with broker-reported information. The mismatch can occur due to differences in lot selection methods or incomplete data transfer between exchanges.

According to a recent notice from the IRS, brokers are required to report gross proceeds for certain digital asset transactions from January 1, 2025. Basis reporting begins for specific transactions from January 1, 2026. Form 1099-DA is the new tax form at the center of this shift.

Taxpayers must still report all income, gains, and losses from digital asset activity, whether or not they receive the form. The notice provides temporary protection allowing taxpayers to use their own cost-basis method and lot identifications on their own books until the end of 2026. However, after this period expires, taxpayers will be required to match the method to the exchange's method or set it up directly with the broker.

Justin Zanardi, a CPA and Product & GTM Lead at crypto tax platform Summ, notes that the issue is most likely to affect users who have moved assets between platforms, traded on multiple exchanges, or used self-custody. He advises investors to maintain accurate records of their transactions, including lot-level information showing what they bought, when they bought it, how much they paid, where it was moved, and when it was sold.