IRS Broker Rule Explained: Key Implications for Crypto Tax Reporting and Accounting

Key Takeaways

• The IRS Broker Rule applies to digital asset brokers starting January 1, 2025. 
• Brokers will use Form 1099-DA to report the sale or exchange of digital assets, sending a copy to the IRS and the user. This form serves as a guide but does not cover every kind of trade.
• Congress voted to repeal the rule for decentralized platforms in March 2025. The repeal still requires the President’s signature to take effect.
• Crypto users remain responsible for tracking cost basis, gains, and losses across all transactions. 

Crypto tax reporting is expanding and reinforcing accountability across the digital asset space. ​In July 2024, the Internal Revenue Service (IRS) finalized regulations concerning the reporting of digital asset transactions by brokers, introducing a new rule to increase oversight and reduce tax gaps. 

The IRS designed the rule to track gains, losses, and cost basis more effectively. Centralized platforms that manage user assets are now obligated to file these reports, helping the IRS enforce crypto tax compliance. Brokers must report cost basis information of digital assets beginning Jan. 1, 2026, with reports due in 2027.

The IRS also introduced a similar requirement for decentralized finance (DeFi) platforms under the specific DeFi Broker Rule. However, in March 2025, the U.S. Senate and House voted to repeal this rule. The repeal is now awaiting the President’s signature before becoming law.

This article examines the general IRS Broker Rule and its future implications for custodial platforms and crypto users.

What Is the IRS Broker Rule?

The IRS Broker Rule is an umbrella regulation that requires custodial or digital asset brokers—such as centralized exchanges (CEX), payment processors,  and some wallet providers—to report user transactions to the IRS using Form 1099-DA. 

This method reflects how stock and securities brokers already report to the IRS. The rule, established under the 2021 Infrastructure Investment and Jobs Act, applies to all transactions on or after Jan. 1, 2025.

Crypto Brokers and Tax Compliance: Key Provisions

The IRS Broker Rule outlines specific requirements for how brokers must report digital asset transactions. These provisions focus on improving clarity, transparency, and tax compliance in the crypto space.

• Definition of digital assets: The rule defines digital assets as any digital form of value recorded on a cryptographically secured ledger or similar technology.
• Broker reporting requirements: Brokers must report key details for each digital asset transaction.
• Gross proceeds: Brokers must disclose the total amount received from the sale of digital assets.
• Transaction dates: Each report must include when the digital asset was bought and sold.
• Customer information: Brokers must include identifying details about the customer involved in the transaction.

IRS Digital Asset Reporting

The IRS has introduced new rules to improve tracking. These rules apply to deadlines and the use of specific forms for compliance.

Form 1099-DA

The IRS issued this new form for crypto tax reporting—Digital Asset Proceeds From Broker Transactions—to help brokers report information to both the IRS and the taxpayer. The form itself was released on December 5, 2024.

These reporting rules apply to all qualifying transactions starting January 1, 2025. The IRS expects these measures to help reduce tax underreporting, support better recordkeeping, and simplify crypto tax reporting for brokers and users.

How Does the IRS Broker Rule Affect Crypto Brokers?

The IRS Broker Rule adds new responsibilities for crypto brokers and platforms that handle digital asset transactions.

• Reporting obligations: Brokers must report crypto transactions to the IRS using Form 1099-DA.
• Required transaction details: Reports must include gross proceeds, transaction dates, and customer identification.
• Added cost: Brokers must upgrade systems and processes to meet IRS standards.
• Increased risk: Noncompliance may lead to audits, penalties, and legal trouble.

Implications for Crypto Holders and Investors

The IRS requires brokers to report gross proceeds from digital asset sales for transactions occurring on or after January 1, 2025, with reports due in 2026-—specifically by February 28 (or March 31 if filed electronically). There is no delay or grace period for this requirement.

Users should consult the official documents and a tax expert for detailed information. However, some general guidelines are outlined below:

Crypto Tax Reporting 2025

Starting January 1, 2025, brokers such as exchanges and payment processors must issue Form 1099-DA for each digital asset transaction. The form shows gross proceeds from crypto sales or exchanges and is sent to the IRS and the user by January 31, 2026, for 2025 activity.

While brokers provide the form, users remain responsible for calculating cost basis, gains, and losses. Form 1099-DA serves as a starting point but does not capture every transaction.

Keeping detailed records is key. Users should document every trade, date, asset type, amount, value, and transaction fee. Accurate records help match IRS forms and prevent reporting mistakes.

Form 1099-DA changes how brokers report crypto activity, but users must still file taxes carefully and include all transactions—even those not listed on the form.

In summary, Form 1099-DA means increased IRS scrutiny of digital asset transactions. Therefore, crypto holders and investors must follow diligent record-keeping and informed tax reporting.

Important Dates for Crypto Tax Compliance

In July 2024, the IRS finalized broker reporting rules under the Infrastructure Investment and Jobs Act. These rules set the foundation for how custodial platforms must report digital asset transactions using Form 1099-DA starting in 2025.

Importance of Tax Compliance in the Crypto Space

The IRS has increased scrutiny of digital asset activity, raising audit risks for crypto holders.

• Accurate tax reporting helps avoid penalties, interest charges, and filing mistakes.
• Users need clear accounting tools to manage complex crypto activity across wallets and platforms.
• Using crypto tax software like CoinTracker, Koinly, or TokenTax can help track transactions and generate reports that are ready for filing.

Future Outlook: Ongoing Legislative and Regulatory Challenges

As pointed out, lawmakers continue to debate how broker reporting rules should apply to decentralized platforms and other non-custodial services. 

The DeFi rule repeal awaits President Trump’s signature, expected soon given his crypto-friendly stance as of March 26, 2025,

Future changes may adjust how the rule defines brokers and how it treats different types of digital asset activity.

Ongoing legislation and regulatory updates will likely shape how users report crypto taxes and how platforms manage compliance.

Ideally, entities and users should always consult a tax expert.

Conclusion

The IRS Broker Rule marks a major shift in how digital asset activity is reported and taxed in the United States. 

Brokers must file Form 1099-DA with the IRS and users starting in 2025, and full enforcement is set for 2026. 

Centralized exchanges, payment processors, and wallet providers now face stricter obligations, while decentralized platforms may see different standards if the repeal is finalized.

Crypto holders must take control of their tax responsibilities by keeping clear and detailed records. Form 1099-DA helps, but it does not replace accurate self-reporting. 

Using crypto tax software can ease the process, especially for users active across wallets and platforms.

Clear records and updated knowledge will help users stay compliant and avoid costly mistakes.

As regulations evolve, staying informed, educated and organized is key. 

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