This year, we issued more than 56 million 1099-DA forms (tax form required to report digital asset transactions) to the IRS, one for every reportable transaction our customers made in 2025. That’s what the law requires, even though nearly a third of those forms (18.5 million) were for transactions worth less than $1. More than half were $10 or less. Three out of four were under $50.
These forms were not sent to sophisticated traders who made big returns from crypto. The vast majority of forms relate to staking rewards measured in fractions of a cent, small purchases, and routine activities. Each generates a form that a real person is now expected to understand, reconcile and report, or risk a notice from the IRS.
The problem is not the technology. It’s the tax code.
What it already costs Americans to file their taxes
Before digital assets enter the picture, the tax system already imposes an extraordinary compliance burden. According to the Tax Foundation, personal tax filings alone cost Americans $146 billion in personal time and expenses.
Additionally, based on IRS estimates and independent surveys of tax filers, the average nonprofessional tax filer spends about eight hours and between $128 and $300 on a standard return. Nearly one in five Americans say they don’t feel ready to file a complaint.
For the more than 55 million American adults who now hold digital assets, there is an additional layer. Standard tax software doesn’t handle crypto transactions, which is why many investors need dedicated crypto tax tools that cost between $49 and $599 per year on top of their regular filing fees.
A typical active holder can spend between $250 and $500 per year just to stay compliant, before counting the hours spent reconciling transactions between exchanges and wallets.
But this is where the situation becomes even more difficult for the average taxpayer. In 2025, brokers like Kraken report gross proceeds but not cost basis. While many taxpayers reported crypto taxes using tax calculators or other software, Form 1099-DA simply caused a lot of confusion for taxpayers because the forms only presented gross proceeds in a way that many did not understand.
We have received thousands of questions from customers trying to understand Forms 1099-DA, in addition to thousands of other requests given the difficulties exchanges are having in filing them within the deadlines set by the IRS and Treasury.
The scale of the problem: Kraken’s 1099-DA data
Here’s what Kraken’s own reporting data for fiscal year 2025 shows:
53.4% of all forms were for transactions of $10 or less. 74.3% had less than $50. Just 8.5% exceeded $600, the threshold that triggers reporting in most other areas of the tax code, such as transactions on a payment app like Venmo.
The hours taxpayers spend reconciling these microtransactions, often with incomplete data, generate costs that are wildly disproportionate to the revenue the IRS will earn from them.
The good news is that some members of Congress are working to solve this problem. Any tax reform that makes life easier for taxpayers should address these fundamental questions.
Fix One: a true de minimis exemption
The concept is simple: a de minimis exemption that excludes small, routine payments of digital assets from capital gains reporting.
Imagine walking into a Steak ‘n Shake and paying for a $7.99 meal with Bitcoin through a payment app. You have triggered a taxable event.
Technically, you’re required to research the cost basis of the specific Bitcoin you spent, calculate whether you made a gain or loss on that fraction of a coin, and report it on Form 8949. All for a hamburger and tallow fries.
The United States is an exception in this regard. The UK, for example, has an annual capital gains deduction that effectively exempts small crypto transactions like this from reporting. A targeted de minimis threshold would not be new. It would only catch up with America.
And while the currently proposed tax legislation includes a de minimis provision, it only covers payment stablecoins. It does not cover Bitcoin, the most widely held digital asset in America and accepted by thousands of American traders.
A meaningful de minimis threshold, indexed to inflation and coupled with anti-abuse safeguards, would eliminate millions of unnecessary forms while protecting revenue integrity.
Congress has already established the regulatory framework for traditional digital payments through the GENIUS Act, signed into law in July 2025. The tax code should be independent of whether you pay with cash, Bitcoin, or stablecoins.
Second solution: end phantom staking income
A large portion of these sub-dollar 1099-DAs are rewards: tiny fractions of tokens earned for helping validate blockchain networks. Although current law is unclear, the IRS considers each award to be treated as ordinary income at the time it is received, valued at its fair market value on that date.
Most people don’t immediately sell staking rewards. They continue to bet. But they now owe taxes on the value they didn’t realize. If the token price drops between receipt and deposit, the taxpayer owes tax on more than the current value of the asset.
This is phantom income and is a consequence of applying the rules written for dividends and salaries to a fundamentally different type of asset.
Congress should allow taxpayers to choose when wagering rewards are imposed: at the time of receipt (like today) or at the time of sale, when the gain or loss is real and measurable. This would eliminate phantom revenue, significantly reduce the volume of reporting on microtransactions, and bring stakes in line with how most Americans actually experience them, as something they hold rather than something they spend.
Kraken and other exchanges already maintain the transaction-level data necessary to support either reporting method. The infrastructure exists; Congress must simply allow this choice.
A bipartisan moment for taxpayers
This is not about helping crypto companies. That’s about 55 million Americans, across every state, age group, and industry, who face a tax system designed before digital assets existed. Congress should act to make life easier for taxpayers.
