How Large Is the Crypto Tax Reporting Load?
Crypto exchange Kraken said it filed 56 million crypto-transaction forms with the Internal Revenue Service for the 2025 tax year, highlighting the scale of reporting now tied to digital asset activity. The data shows that a large portion of these filings relate to low-value transactions rather than large trades.
Roughly 18.5 million of the forms covered transactions valued below $1, while more than half were for $10 or less. Only 8.5% of the newly introduced Form 1099-DAs exceeded $600, and 74% were below $50, according to the company.
Each form is sent to both the IRS and the customer, creating a reconciliation requirement for taxpayers. Kraken estimates that an active crypto user may face an additional $250 to $500 annually for specialized tax software, on top of standard filing costs.
“The hours taxpayers spend reconciling these micro-transactions, often with incomplete data, generate costs wildly disproportionate to any revenue the IRS will collect from them,” Kraken said.
Why Are Small Transactions Creating Disproportionate Complexity?
The reporting burden stems from the absence of a de minimis exemption for crypto payments. Under current rules, even small transactions can trigger taxable events that must be calculated and reported individually.
Kraken highlighted that paying for everyday purchases using crypto requires users to determine the cost basis of the specific portion spent and calculate gains or losses for each transaction. This requirement applies regardless of transaction size.
Brokers reporting for 2025 provide gross proceeds without cost basis, meaning forms show what was sold but not the original purchase price. This has led to confusion among users, with Kraken reporting thousands of client inquiries tied to incomplete reporting data.
The broader tax burden is already significant. The Tax Foundation estimates that US taxpayers spend $146 billion annually in time and expenses on tax compliance, while the National Taxpayers Union Foundation estimates an average of 13 hours and $290 per return for non-business filers.
Investor Takeaway
What Role Do Staking Rewards Play in the Reporting Issue?
Kraken identified staking rewards as a second source of reporting complexity. Under current rules, rewards are treated as ordinary income at the time they are received, based on market value at that moment.
Many users retain these tokens rather than selling them, creating a mismatch between taxable income and realized cash flow. If token prices decline after receipt, users may face tax liabilities that exceed the current value of their holdings.
Kraken described this as phantom income and noted that a large share of sub-dollar Form 1099-DAs were tied to staking distributions, further contributing to the volume of low-value filings.
Investor Takeaway
What Changes Is Kraken Pushing for in Congress?
Kraken is advocating for legislative changes to address these issues. The exchange is calling for a broad, inflation-indexed de minimis exemption that would exclude small transactions from taxable reporting, rather than limiting such provisions to stablecoins.
It is also urging lawmakers to allow taxpayers to choose when staking rewards are taxed, either at the time of receipt under current rules or at the point of sale when gains or losses are realized.
The company said existing exchange infrastructure already supports both reporting approaches, but regulatory authorization is required to implement this flexibility. As crypto adoption expands, the outcome of these proposals may shape how digital assets are used in everyday transactions and investment strategies.
