IRS bitcoin reporting requirements

Navigate new wallet tracking rules, avoid costly penalties, and stay compliant with the latest IRS bitcoin reporting requirements.

This page is part of our comprehensive US Bitcoin Tax Guide.

What's changed for 2025:

Form 1099-DA starts for 2025 transactions (gross proceeds only). Basis reporting for covered assets starts with 2026 transactions.
Safe-harbor (Rev. Proc. 2024-28): You may allocate unused basis to wallets/accounts as of Jan 1, 2025 to end "universal basis."
If you use specific-unit allocation, complete it before the earlier of your first 2025 sale or your 2025 return due date (incl. extension). Keep per-wallet/account records.

The Problem: Bitcoin tax reporting just became significantly more complex. Starting in 2025, the IRS requires wallet-by-wallet cost basis tracking, introduces new Form 1099-DA reporting, and has ramped up enforcement with severe penalties for non-compliance.

Bottom Line: Every bitcoin transaction must be properly reported using specific IRS forms, with critical deadlines that can't be missed. Get it wrong, and you could face penalties up to 75% of unpaid taxes.

Limitations of DIY bitcoin tax reporting

Bitcoin holders can struggle with tax compliance. The complexity has increased dramatically, often creating problematic gaps in reporting.

Manual tracking is tricky

Time-consuming calculations across multiple wallets and exchanges
Error-prone cost basis tracking without proper software tools
Missing transaction records from forgotten wallets or closed exchanges
Confusion over taxable events vs. non-taxable transfers

New 2025 rules create additional challenges

The IRS's wallet-by-wallet requirement means you can no longer pool all your bitcoin purchases together.

Each wallet must maintain separate cost basis records, making manual tracking nearly impossible for active users.

Common costly mistakes

Underreporting income by missing taxable transactions
Incorrect cost basis calculations leading to overpaid or underpaid taxes
Failed deadline compliance resulting in automatic penalties
Inadequate record-keeping that can't survive an IRS audit

Essential IRS forms for bitcoin reporting

Understanding which forms you need is critical for compliance.
Each form serves a specific purpose in reporting your bitcoin activity to the IRS.

Form 1099-DA (New for 2025)

Purpose: Reports gross proceeds from bitcoin sales and exchanges

Who receives it: All users of centralized exchanges like Coinbase, Kraken, Gemini
What it shows: Total dollar amount received from selling bitcoin
When you get it: By January 31st for previous year's transactions
Important note: Starting 2026, will also include cost basis information

Estimate your tax liability before filing with our US Bitcoin Tax Calculator.

Form 8949 (Capital Gains & Losses)

Purpose: Details each individual bitcoin transaction

When required: Every time you sell, trade, or spend bitcoin
Information needed: Asset description, acquisition date, sale date, proceeds, cost basis
Two sections: Short-term (<1 year) and long-term (>1 year)

Schedule D (Capital Gains Summary)

Purpose: Summarizes total gains and losses from Form 8949

Key function: Transfers totals from Form 8949 to your main tax return
Tax calculation: Determines your final capital gains tax liability
Loss benefits: Up to $3,000 in losses to offset ordinary income

Form 1040 (Main Tax Return)

Purpose: Primary return where all bitcoin activity is reported

Digital asset question: Must answer "Yes" if you had any bitcoin transactions
Line 7: Where net capital gains or losses from Schedule D appear
Compliance requirement: Failing to check "Yes" when required can trigger audits

Schedule 1 (Additional Income)

Purpose: Reports bitcoin received as income

When needed: Bitcoin mining rewards, staking income, payments for services
Tax treatment: Taxed as ordinary income at your regular tax rate
Self employment: May also require Schedule SE for mining activities

Learn more in our Bitcoin Income Tax Guide

Critical IRS deadlines

Missing IRS deadlines can trigger automatic penalties and interest charges. Always verify deadlines on the official IRS Tax Calendar.

Sept 15, 2025 — Q3 2025 estimated tax

Who: If you expect to owe ≥$1,000 for 2025 and withholding won't cover it.

Action: Make your Q3 estimated payment

Oct 15, 2025 — Extended 2024 return due

Who: Filers who submitted Form 4868 by Apr 15, 2025.

Action: File the 2024 return

Jan 15, 2026 — Q4 2025 estimated tax

Who: Anyone making estimates for 2025.

Action: Make your Q4 estimated payment

Feb 17, 2026 — Brokers furnish 1099-DA

Who: If a broker effected your 2025 bitcoin sales/exchanges.

Action: Reconcile gross proceeds to your Form 8949

Apr 15, 2026 — 2025 individual return due

Who: Calendar-year filers.

Action: File 2025 Form 1040 or file an extension

Apr 15, 2026 — Q1 2026 estimated tax

Who: If you expect to owe for 2026.

Action: Make Q1 payment

Jun 15, 2026 — Q2 2026 estimated tax

Who: If you expect to owe for 2026.

Action: Make Q2 payment

Penalties for non-compliance

The IRS has increased enforcement of bitcoin tax requirements. Understanding these penalties helps you prioritize proper reporting and avoid serious financial consequences.

Failure to file penalties

Penalty: 5% of unpaid taxes per month, up to 25% maximum

Example: If you owe $10,000 in bitcoin taxes and you file 3 months late = $1,500 penalty
Minimum penalty: $485 if return is over 60 days late
Combined max: Failure to file and pay penalties capped at 47.5%

Failure to pay penalties

Penalty: 0.5% of unpaid taxes per month, up to 25% maximum

Interest charges: Compound daily on both taxes owed and penalties
Current rate: Approximately 8% annually (adjusted quarterly)
Payment plans: Available but doesn't stop penalties from accruing

Accuracy-related penalties

Penalty: 20% of the underpaid tax amount

Triggers: Negligent or careless reporting of bitcoin transactions
Substantial understatement: Underreporting more than 10%
Can be avoided: With reasonable cause and good faith efforts

Fraud penalties

Penalty: 75% of the underpaid tax due to fraud

Criminal charges: Can result in felony charges if willful
Prison time: Up to 5 years for tax evasion
Additional consequences: Asset forfeiture, criminal record

Specific bitcoin enforcement actions

The IRS has dedicated significant resources to cryptocurrency compliance:

John Doe summons: Used to obtain customer data from exchanges
Blockchain analysis: Advanced software tracks bitcoin transactions
Warning letters: Sent to thousands of suspected non-compliant taxpayers
Increased audits: Crypto-related returns face higher audit rates

The IRS addresses compliance in their Virtual Currency FAQ.

How to avoid penalties

File on time: Even if you can't pay, filing reduces penalties
Pay estimated taxes: Quarterly payments prevent large year-end bills
Maintain records: Detailed transaction logs support your reporting
Seek help early: Professional assistance before problems arise
Voluntary disclosure: Come forward proactively if you've missed reporting

Streamline your bitcoin tax reporting

Instead of struggling with complex manual calculations and risking costly errors, smart bitcoin holders use proven tools and strategies to ensure accurate, compliant reporting.

Use a crypto tax reporting service

Manually tracking works fine if you have a handful of transactions per year. But if you've got dozens (or hundreds) of transactions, manual tracking quickly becomes time-consuming and error-prone, especially with new wallet-by-wallet requirements.

Tax services like Koinly solve this:

Automatic import from 700+ exchanges and wallets
Wallet-by-wallet tracking compliant with 2025 IRS requirements
Real-time cost basis calculation using your preferred method
Complete audit trail with detailed transaction records

Key benefits:

Saves hours of manual calculation time
Eliminates human error in cost basis tracking
Generates IRS-compliant Form 8949 and Schedule D
Handles complex scenarios like DeFi, NFTs, and staking

Calculate before you file

Our Bitcoin Tax Calculator helps you estimate your federal & state tax obligations before filing.

Our US Bitcoin Tax Calculator provides:

Instant estimates of your bitcoin tax obligations
Scenario planning for different selling strategies
Tax-loss harvesting opportunities to reduce your bill

Strategic benefits:

Identify opportunities to reduce tax liability
Avoid year-end surprises that strain cash flow
Make informed decisions about holding vs. selling

Professional tax preparation

If your bitcoin activity is complex, a qualified tax professional can help ensure accuracy and compliance. While Bitcoin Well doesn't provide tax services, we encourage you to work with a professional for peace of mind.

Complex situations require expertise:

Large portfolios with multiple wallets and exchanges
Business use of bitcoin requiring different tax treatment
Prior years with missed reporting that need correction
Audit defense and IRS correspondence

When to consider professional help:

Bitcoin gains exceed $50,000 in a single year
You've received IRS notices about cryptocurrency
Your situation involves mining and/or business transactions
You need audit protection and representation services

Frequently asked questions

This guide is for educational purposes only. Bitcoin Well is not responsible for any tax liabilities, penalties, or interest charges resulting from your use of this information. The IRS has not reviewed or endorsed this content. We make no warranties about the accuracy, completeness, or reliability of the tax information provided. Always consult with a qualified CPA, enrolled agent, or tax attorney before making tax decisions.

The information provided represents our understanding of current federal tax rules as they apply to bitcoin. We are not tax professionals and this content does not constitute tax, legal, or financial advice. Tax laws change frequently and vary by individual circumstances. State and local taxes may apply differently. Your specific situation may require different treatment than described here.