As 2026 nears, U.S. crypto investors face a drastically different tax reporting landscape — with several new rules taking effect for the 2025 trading year and 2026 tax season, dubbed a “watershed moment” for crypto taxation by the industry. A key change is Form 1099-DA: Starting in 2025, U.S. centralized exchanges and other “brokers” must report users’ crypto asset sales and dispositions to the IRS, with the first 1099-DA forms set to be distributed in 2026. Initially, these forms will only include gross proceeds (not cost basis). If taxpayers fail to clearly report their cost basis on their returns, the IRS may default to a $0 cost basis and issue automatic tax notices. Simultaneously, the “specific identification” cost basis method will replace the previously common “first-in, first-out (FIFO)” algorithm. The IRS now mandates that each trading platform account or wallet track cost basis separately — meaning when selling assets, users can only match them to batches held in that specific wallet. This will significantly impact investors with multiple exchanges, DeFi, or self-custody setups. Industry tax experts emphasize that reconstructing historical ledgers and organizing all on-chain/off-chain transaction records is a one-time but extremely labor-intensive task. While the IRS has offered a transitional safe harbor in its 2024-28 numbered procedures, the compliance window is short — and very few investors have completed this process. Tax experts warn that without early preparation, the 2026 tax season could bring “automatic triggers” due to data mismatches. Under the IRS’s more data-driven, stricter oversight, proactive record-keeping, early planning, and partnering with crypto-savvy tax professionals are fast becoming a “required course” for U.S. crypto investors.
