IRS Crypto Tax Reporting Requirements: Form 8949 Explained for 2025

Every time you sell, trade, or spend Bitcoin, Ethereum, or any other cryptocurrency, the IRS sees a taxable event. It doesn’t matter if you made a profit, broke even, or lost money. If you moved crypto out of your wallet - whether to an exchange, another person, or to buy something - you owe taxes on it. And for 2025, Form 8949 is the only form that can properly document those transactions.

What Is Form 8949 and Why Does It Matter?

Form 8949 isn’t new. It’s been around for decades to track stock sales. But since the IRS ruled in 2014 that cryptocurrency is property - not currency - it became the go-to form for crypto taxes. You don’t file Form 8949 alone. It feeds into Schedule D, which then rolls into your main tax return, Form 1040. But without Form 8949, the IRS won’t accept your crypto gains or losses.

Here’s the catch: You must report every single crypto disposal. That includes:

• Selling crypto for USD
• Trading one crypto for another (like BTC for ETH)
• Using crypto to buy goods or services
• Gifts or donations of crypto (if above $15,000)
• Hard forks or airdrops that you later sell

Even if you didn’t get a 1099 form from Coinbase, Kraken, or Binance, you still have to report it. The IRS doesn’t care if your exchange sent paperwork. They care if you moved the asset.

What Information Goes on Form 8949?

This isn’t a summary form. It’s a transaction log. For every crypto sale or trade, you need six exact details:

• Description of property: "Bitcoin", "Ethereum", "UNI", etc.
• Date acquired: When you got it - down to the day.
• Date sold or disposed: When you traded, sold, or spent it.
• Gross proceeds: How much USD (or value in USD) you received.
• Cost basis: What you paid for it, including fees.
• Gain or loss: Gross proceeds minus cost basis.

Example: You bought 0.5 BTC for $25,000 on March 15, 2023. On June 10, 2025, you sold it for $32,000. Your gain is $7,000. You enter that as a long-term gain because you held it over a year.

But if you bought 0.1 ETH for $300 on January 5, 2025, and sold it for $380 on February 1, 2025? That’s a short-term gain of $80 - taxed at your regular income rate.

Short-Term vs. Long-Term: The Big Tax Difference

Form 8949 splits your crypto activity into two sections:

• Short-term: Assets held one year or less. Gains taxed at your normal income rate - up to 37%.
• Long-term: Assets held more than one year. Gains taxed at 0%, 15%, or 20%, depending on your income.

That’s why timing matters. If you’re sitting on a big gain, holding a few more months could cut your tax bill in half. But if you’re underwater, selling before the one-year mark might let you offset other income.

2025’s Biggest Change: Form 1099-DA Is Here

Starting January 1, 2025, crypto exchanges must issue a new form: Form 1099-DA. This is the biggest shift in crypto tax reporting since the IRS first classified crypto as property.

Here’s what it does:

• Reports gross proceeds from all crypto sales and trades.
• Does NOT report cost basis in 2025 - that comes in 2026.
• Applies to all U.S.-based exchanges and platforms like Coinbase, Kraken, and Gemini.

So even though you’ll get a 1099-DA, you still need to fill out Form 8949. Why? Because the exchange doesn’t know your cost basis. If you bought Bitcoin in 2021 on Binance and moved it to Coinbase in 2024, Coinbase has no record of what you paid. Only you do.

And here’s the kicker: The IRS now requires wallet-by-wallet accounting. No more averaging your cost basis across all your wallets. If you bought BTC at $10,000, $20,000, and $40,000 across three different wallets, you must track each purchase separately. When you sell, you have to pick which coins you sold - FIFO, LIFO, or specific identification. Most people use FIFO (first in, first out), but you can choose.

What About DeFi, Airdrops, and Staking?

Form 8949 doesn’t cover everything. If you earned staking rewards, mining income, or DeFi yield, those go on Form 1099-MISC (if over $600) or as ordinary income on Schedule 1. But if you later sell those rewards, you report the sale on Form 8949.

Airdrops are tricky. If you received free tokens and didn’t do anything to earn them, you pay income tax on their fair market value the day you received them. Then, when you sell them, you pay capital gains tax on the difference between that value and your sale price.

Example: You got 500 SOL from a Solana airdrop. On the day you received it, SOL was worth $10 each. You report $5,000 as income. A year later, you sell it for $15 each. Your gain is $2,500 - long-term capital gain. Report that on Form 8949.

How Do People Actually Do This Without Going Crazy?

Most people with more than 10 crypto transactions use software. Tools like CoinTracker, Koinly, and TaxBit connect to your wallets and exchanges, pull your transaction history, calculate cost basis, and auto-fill Form 8949.

But it’s not foolproof. Many users report errors:

• Missed wallet transfers between exchanges
• Incorrect cost basis for tokens from forks
• Double-counting staking rewards as both income and capital gains

The best advice? Do a manual check every quarter. Export your transaction history from every wallet and exchange. Match it against your software report. Fix mismatches before tax season.

What Happens If You Don’t Report?

The IRS has been auditing crypto taxes harder since 2021. They now cross-check data from exchanges with what you report. If you got a 1099-DA for $50,000 in sales but reported $0, you’ll get a letter. Then a notice. Then an audit.

Penalties start at $100 per unreported transaction - and can go up to 75% of the tax owed if the IRS says you’re being fraudulent. In 2024, the IRS collected over $6.2 billion in crypto-related taxes. That number is climbing fast.

What You Need to Start Now

You don’t have to wait until April. Here’s what to do today:

1. Collect all wallet addresses and exchange accounts - including DeFi platforms like Uniswap, Aave, or Curve.
2. Export transaction history from every platform (CSV or JSON files).
3. Track your cost basis - write down the date, amount, and USD value for every purchase.
4. Use crypto tax software - even the free versions help organize data.
5. Review your records every 3 months - don’t wait until December.

The IRS doesn’t care if you’re new to crypto. They care if you’re honest. The more organized you are, the less stress you’ll have.

What’s Next After 2025?

By 2026, exchanges will start reporting cost basis on Form 1099-DA. That’ll make things easier - but only if you’ve kept good records. Until then, you’re still the primary keeper of your own tax data.

There’s talk in Congress about changing crypto tax rules - maybe lowering long-term rates or exempting small transactions under $200. But nothing’s passed yet. For now, the rules are clear: every move counts. Every gain, every loss, every trade. You’re responsible for reporting it.