U.S. Crypto Investors Hit by IRS Letter Surge as Tax Crackdown Looms

In just two months, crypto tax platform CoinLedger observed a staggering 700% surge in the number of U.S. users receiving IRS warning letters, signaling a sharp escalation in federal tax enforcement targeting digital asset holders.

Several accounting firms, including Taxing Cryptocurrency, have corroborated this trend, confirming that crypto investors across the country are increasingly being flagged by the tax authority.

CoinLedger CEO David Kemmerer believes this spike in enforcement reflects widespread confusion and misinformation in the retail crypto community, where many investors still mistakenly assume they are not obligated to report digital asset transactions on their tax returns. He explained that this new wave of IRS letters is catching even well-intentioned investors off guard, especially those who tried to comply but lacked detailed documentation of their trading history.

“We’re witnessing a surge of panic among everyday investors who genuinely attempted to follow the rules,” Kemmerer said, adding, “Automated systems don’t care about intent—if your cost basis data is missing or inconsistent, you’re getting flagged.”

Trump Pushes Back, But Congress Has Yet to Act

Although President Donald Trump has publicly expressed his support for eliminating taxes on U.S.-based cryptocurrency holdings, no legislation has yet been introduced in Congress to formalize or advance this proposal, according to Kemmerer.

However, Trump did take one regulatory step in April when he signed a resolution repealing an IRS rule—originally finalized during the Biden administration—that would have included DeFi platforms under the formal definition of “brokers” for tax purposes. While that repeal provided temporary relief to some decentralized projects, it does not affect the broader reporting mandate looming on the horizon.

Beginning January 1, 2026, crypto brokers will be legally required to submit Form 1099-DA, which includes both the gross proceeds and the cost basis of every digital asset sale. This marks a major shift, as it will provide the IRS with direct, automated access to an investor’s full gain and loss history—dramatically increasing transparency and enforcement power.

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Even Compliant Investors Could Face Trouble

With the arrival of 1099-DA, brokers will need to report not just how much users sold their assets for, but also what they originally paid for them. While this move is designed to minimize tax evasion, it could also penalize honest investors who failed to properly track or store their original cost data.

“Inaccurate or missing records can trigger IRS scrutiny, even if the investor didn’t intend to hide anything,” Kemmerer warned. “That’s why keeping organized records is no longer optional—it’s essential.”

Kemmerer also revealed that the IRS has begun sending multiple types of crypto-related letters, some of which are simply advisory while others imply potential audits or deeper investigations. He cautioned that if investors don’t prepare adequately, they could face unexpected penalties or compliance headaches, even if they had no malicious intent.

Kosta Gushterov

Kosta has been working in the crypto industry for over 4 years. He strives to present different perspectives on a given topic and enjoys the sector for its transparency and dynamism. In his work, he focuses on balanced coverage of events and developments in the crypto space, providing information to his readers from a neutral perspective.