Coinbase: IRS 1099-DA Rules Create Reporting Confusion and Higher Compliance Costs

Coinbase says the IRS’s new crypto tax reporting rule (Form 1099-DA) will create operational headaches and confusion for exchanges and retail traders. The 1099-DA rule, finalized in 2024 and effective for transactions from 2025 (forms expected in the 2026 tax season), requires custodial brokers to report gross proceeds from certain digital-asset sales and exchanges. Coinbase warns exchanges often lack reliable cost-basis data because assets move across wallets and platforms, so initial reporting of gross proceeds without cost basis will force traders to compute acquisition costs themselves and could produce misleading tax records. Coinbase also flagged specific pain points: mandatory reporting of stablecoin transactions (eg. USDC) despite their dollar peg, inclusion of tiny gas fees and small retail trades that yield negligible taxable events, and higher compliance costs to build new tracking and reporting systems. The IRS adopted a phased rollout that permits reporting proceeds without gains/losses initially and removed a proposal to extend broker reporting broadly to DeFi platforms. Coinbase plans customer education and to add cost-basis calculation tools in a later phase. For traders: expect short-term administrative friction, more individual tax work and record reconciliation, possible increases in tax-related customer support and account activity, and incremental compliance costs for exchanges that could influence fee structures or service workflows.