Poll: Most U.S. crypto investors fear IRS penalties in 2025

More than half of U.S. crypto investors worry about IRS penalties as new rules require brokers to automatically report 2025 digital asset sales and exchanges, according to a late-January poll of 1,000 investors by crypto tax platform Awaken Tax.

The shift centers on the IRS’s new Digital Asset Proceeds From Broker Transactions form, or Form 1099-DA. The measure moves crypto taxation from self-reporting to direct reporting by brokers, giving the IRS a clearer view of investor activity by drawing sales data from exchanges. Brokers such as Coinbase will be required to report customers’ sales and exchanges that occurred in 2025, enabling the IRS to compare those figures with individual tax returns.

Awaken Tax founder Andrew Duca characterized the framework as treating crypto like traditional securities even though user behavior differs. “It means crypto is being treated like stocks, but it doesn’t behave in that way. Real crypto users will move assets between multiple wallets and interact with decentralized finance protocols, using pretty complex trading strategies,” he noted.

A key limitation flagged by Duca is that 1099-DA reports proceeds from a sale but does not include cost basis, which is the original purchase price plus related acquisition costs used to calculate gains or losses. When assets arrive from self-custody or another platform, an exchange often cannot see the investor’s acquisition history.

“Coinbase actually cannot send the right information, because you can imagine if someone has bitcoin in a cold storage wallet ledger, they send it to Coinbase to sell. Coinbase doesn’t know your acquisition price,” he explained. “The 1099-DA form reports proceeds, but it doesn’t report tax basis.”

Because cost basis may be missing from broker reports, the responsibility falls on taxpayers to reconcile gains and losses on the IRS’s updated Form 8949. Many investors may need to pull records from multiple wallets, centralized exchanges, and on-chain activity to complete accurate filings.

Duca described the rules as a “blunt instrument” aimed at lifting compliance in a market where reporting has been low. He estimated that fewer than 20% of crypto holders currently file their obligations correctly and argued the new framework was designed to raise that figure quickly. “They just added this super blunt instrument to try to get that 20% up to 80% in a year,” he said.

The rollout of 1099-style statements for digital assets is expected to alert a large number of Americans to the reporting change. While the intent is to reduce errors and tax evasion, the absence of cost basis on 1099-DA means some investors may see large proceeds amounts without context on whether transactions produced gains or losses.

For taxpayers, the main change from prior years is that crypto brokers will send sales information directly to the IRS. That increases the risk of mismatches if returns do not account for those transactions. Investors who used multiple platforms or self-custodied wallets may face added work to assemble a complete transaction history and apply cost basis for each sale.

Awaken Tax’s poll reflects rising concern as tax season planning begins. The 1099-DA framework standardizes how brokers report digital asset sales, but gaps in cost basis tracking leave the final responsibility with filers to complete accurate returns and avoid penalties.

As we reported earlier, 18 U.S. House members led by Rep. Mike Carey sent a letter to Scott Bessent, serving as U.S. Treasury Secretary and acting IRS head, urging a revisit of staking tax rules before the 2026 tax year and an explanation of the 2023 guidance.

They cited Revenue Ruling 2023-14, which requires cash-method taxpayers to include the fair market value of staking “validation rewards” in income when they gain dominion and control. The lawmakers argue staking and mining create new property that should be taxed when sold, not when created.