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.<\/p>\n
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.<\/p>\n
\u201cWe\u2019re witnessing a surge of panic among everyday investors who genuinely attempted to follow the rules,\u201d Kemmerer said, adding, \u201cAutomated systems don\u2019t care about intent\u2014if your cost basis data is missing or inconsistent, you\u2019re getting flagged.\u201d<\/p>\n
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.<\/p>\n
However, Trump did take one regulatory step in April when he signed a resolution repealing an IRS rule\u2014originally finalized during the Biden administration\u2014that would have included DeFi platforms under the formal definition of \u201cbrokers\u201d 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.<\/p>\n
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\u2019s full gain and loss history\u2014dramatically increasing transparency and enforcement power.<\/p>\n