American Crypto Holders Are Scared and Confused About This Year’s New IRS Tax Rules
•February 18, 2026
0
Companies Mentioned
Why It Matters
The mandate could trigger a wave of penalties for under‑reported gains, forcing the crypto market toward stricter tax compliance and reshaping how digital‑asset services handle reporting.
Key Takeaways
- •Over 50% fear IRS penalty under new rules.
- •Form 1099‑DA reports proceeds, not tax basis.
- •Coinbase cannot provide acquisition cost data to IRS.
- •Compliance under 20%, aim to reach 80% this year.
- •DeFi and multi‑wallet trades complicate accurate reporting.
Pulse Analysis
The IRS’s introduction of Form 1099‑DA marks a watershed moment for crypto taxation in the United States. By obligating brokers to forward transaction proceeds directly to the agency, regulators hope to eliminate the gray area that has long shielded many investors from scrutiny. This top‑down approach mirrors traditional securities reporting, but the crypto ecosystem’s unique characteristics—rapidly evolving protocols, cross‑chain swaps, and a reliance on self‑custody—make a straight‑line transfer of data problematic. As a result, the policy’s intent to increase transparency collides with practical implementation hurdles.
At the heart of the confusion is the missing cost‑basis information. Exchanges such as Coinbase can confirm how much a user sold, yet they lack visibility into the original acquisition price, especially when assets move through cold wallets or decentralized platforms before reaching the exchange. Without accurate basis, taxpayers must reconstruct purchase histories on Form 8949, a task many find daunting. This gap not only raises the risk of misreporting but also fuels anxiety among holders who fear inadvertent penalties. Moreover, DeFi participants who earn yields, stake tokens, or engage in liquidity mining face additional layers of taxable events that the blunt 1099‑DA framework does not capture.
The broader market impact could be profound. Compliance rates, currently estimated below 20%, are expected to surge as the IRS targets the 80% of users it believes are under‑reporting. Crypto firms are scrambling to develop tooling that automates basis calculations and integrates with tax software, while some advocate for legislative refinements to accommodate decentralized activity. In the meantime, investors are urged to maintain meticulous transaction records and seek professional advice. The coming months will reveal whether the IRS’s aggressive stance drives meaningful compliance or simply adds another layer of complexity to an already intricate tax landscape.
American crypto holders are scared and confused about this year’s new IRS tax rules
Feb 18, 2026, 1:13 p.m.
A recent poll of 1,000 American investors in digital assets found that over half are scared they'll face an IRS tax penalty this year as new transparency rules governing crypto exchanges take effect.
The data collected at the end of January by crypto‑tax platform Awaken Tax canvassed U.S. holders’ concerns about a radical shift from self‑disclosure to automatic reporting of transactions.
This has been enacted through the introduction of the “Digital Asset Proceeds From Broker Transactions,” or Form 1099‑DA, which tens of millions of Americans will be made aware of over the next month or so.
The new rules are designed to clamp down on crypto tax evasion and compel brokers, such as crypto exchange Coinbase (COIN), to report all sales and exchanges of digital assets that took place during 2025 to the tax agency.
The aim is to give tax authorities a clear view of investor gains and losses by opening up customer data inside exchanges for the first time, allowing the IRS to compare what crypto brokers report with what taxpayers file.
While the goal is to remove any margin of error, the rules are a “blunt instrument,” created by legislators who know nothing about crypto, according to Awaken Tax founder Andrew Duca.
“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 (DeFi) protocols, using pretty complex trading strategies,” Duca said.
Companies like Coinbase can provide information only on the proceeds of sales of crypto and are unable to report tax basis for any given digital asset — typically the purchase price plus acquisition costs — which can then be used to calculate capital gains or losses upon its sale.
“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, what you bought it for. So Coinbase is sending incorrect forms to the IRS. The 1099‑DA form reports proceeds, but it doesn’t report tax basis,” Duca said.
Coinbase is well aware of the confusion this will cause. The onus falls on the holder of crypto to “patch” what’s missing in terms of their crypto acquisition costs and actual tax basis via the IRS’s updated Form 8949, Duca said.
Duca acknowledges that crypto tax compliance is extremely low: under 20 % of crypto holders report what they ought to, he said.
“It’s really not been thought out well and is kind of horrible for crypto users. But it's what they could do the quickest and the easiest,” Duca said. “They just added this super blunt instrument to try to get that 20 % up to 80 % in a year.”
0
Comments
Want to join the conversation?
Loading comments...