Cryptocurrency started as a way to invest. Now, it’s useful for many things. You can buy stuff, get paid, send gifts, or even earn rewards by staking what you hold. But as more people use it, it’s important to know about the taxes you might owe.
One essential tax document you may encounter while reporting crypto transactions is Form 1099-B. This guide will explain what is a 1099-B form, its reporting requirements, potential inaccuracies, and how to ensure you stay compliant with IRS tax laws.
1099-B Form Meaning
Cryptocurrencies are growing fast. The IRS wants to make sure people report their digital asset trades. Before, the 1099-B form was just for regular stocks. However, times have changed, and now, some digital asset deals that look like securities will also need to be reported using Form 1099-B.
Form 1099-B is a tax form from the IRS. It tracks the sale of assets like stocks and cryptocurrency. This form shows how much money you made, what you paid for the assets, and any gains or losses when you sold them.
While traditional brokers have been using IRS tax form 1099 b for years, crypto exchanges have now started adopting it to report taxable events. The form is sent to both taxpayers and the IRS, ensuring all transactions are accounted for.
Form 1099-B Reporting Requirements for 2025
New Developments
The IRS has mandated that brokers report sales of digital assets that qualify as securities on Form 1099-B. This change aims to enhance transparency and ensure taxpayers accurately report gains or losses from their crypto activities.
What Does This Mean for You? Instructions for Form 1099-B
If you’re trading cryptocurrencies through platforms that act as brokers, and those assets are classified as securities, expect to receive a Form 1099-B for the 2025 tax year. This form will detail:
- Description of the Asset: The specific cryptocurrency sold.
- Date of Acquisition: When you originally purchased the asset.
- Date of Sale: When you sold or exchanged the asset.
- Proceeds: The amount you received from the sale.
- Cost Basis: What you originally paid for the asset.
- Gain or Loss: The difference between the proceeds and the cost basis.
Receiving the Form
By the end of January 2026, brokers are required to furnish Form 1099-B to both the IRS and taxpayers. Ensure you keep an eye on your mail to receive this document.
Reviewing the Information
It’s essential to meticulously review the details on the form:
- Accuracy of Transactions: Ensure all listed transactions are correct.
- Cost Basis Verification: Confirm that the cost basis matches your records. Discrepancies can arise, especially if you’ve transferred assets between wallets or platforms.
Reporting on Your Tax Return
To ensure proper Form 1099-B reporting requirements, cryptocurrency disposals must be documented on Form 8949. This form requires key details such as:
- Description of the property (e.g., Bitcoin, Ethereum, etc.)
- Purchase date and disposal date
- Cost basis (the original price you paid for the crypto)
- Gross proceeds from the sale
- Capital gains or losses
After filling out Form 8949, you must transfer the summarized amounts to Schedule D, which reports overall capital gains and losses.
Do You Need to Include Form 1099-B in Your Tax Return?
Technically, Form 1099-B is not an entry form for your tax return, meaning you don’t need to attach it when filing. However, it plays a crucial role in determining your capital gains and losses, which must be reported.
Failing to report your crypto transactions accurately can lead to an IRS Notice CP2000, a letter alerting you about discrepancies in your tax filing. The IRS can track crypto transactions through exchanges and blockchain data, even if you don’t report them yourself.
Why is the Information on Form 1099-B Incomplete or Inaccurate?
If you use multiple crypto exchanges or wallets and transfer assets between them, Form 1099-B might not show the correct cost basis. This is because exchanges do not track transactions outside their platform.
Example:
If Carl buys Ethereum for $30,000 on Binance and later sells it on Coinbase for $40,000, Coinbase may not have access to his purchase data. As a result, his cost basis could be reported as ‘n/a’ or ‘$0’, making it appear as though he has a $40,000 capital gain instead of $10,000. Without proper documentation, Carl could end up paying more tax than required.
The Challenge of Cost Basis Transfer Reporting
A simple solution might seem to be for exchanges to share cost basis information when users transfer crypto between platforms. However, due to the decentralized nature of cryptocurrency, this is not feasible.
Most cryptocurrencies run on blockchains. These blockchains work on their own, separate from big exchanges. Some centralized platforms do connect with blockchains, but there are tons of decentralized exchanges (DEXs), wallets, and NFT marketplaces out there. This makes it hard to keep track of prices consistently across different platforms.
How to Ensure Accurate Crypto Tax Reporting
Since Form 1099-B might not always have complete data, the best approach is to use crypto tax software like ZenLedger. Here’s how it can help:
- Import transactions: Sync all your crypto transactions from 500+ exchanges.
- Automatic calculations: The software determines your cost basis, fair market value, and capital gains/losses.
- Error resolution: Use the resolution center to fix inaccuracies.
- Review additional income: Report mining, staking, lending, gifts, airdrops, and forks.
- Generate tax reports: Auto-populate IRS tax forms like Form 8949, Schedule D, and Schedule 1.
With ZenLedger, crypto tax reporting becomes stress-free and accurate, ensuring you remain IRS-compliant without overpaying.
Final Thoughts
Understanding IRS tax form 1099-B and its reporting requirements is essential for every crypto investor. While Form 1099-B is helpful in tracking crypto transactions, it can sometimes be inaccurate. To avoid overpaying taxes or triggering an IRS notice, you should:
- Keep detailed records of your transactions.
- Use crypto tax software like Zenledger to reconcile missing cost basis data.
- Report capital gains and losses correctly using Form 8949 and Schedule D.
By staying informed and proactive, you can ensure compliance with crypto tax laws and avoid unnecessary tax burdens. Happy trading and responsible tax filing!
ZenLedger can help you easily calculate your crypto taxes, and also find opportunities for you to save money and trade smarter. Get started for free now or learn more about our tax professional prepared plans!
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide tax, legal, or financial advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
