U.S. Clutters Crypto Tax Reporting, Coinbase Says

Coinbase has publicly criticised the IRS’s new 1099-DA crypto tax-reporting rules as cluttered, confusing and overly burdensome for many retail users, arguing that mandatory compliance will create significant reporting noise for millions of Americans and divert resources to low-value tasks.

The company warned that exchanges will only report gross proceeds to the IRS this first year, leaving customers responsible for reconciling cost basis and calculating gains or losses, a process Coinbase says will create confusion especially for those unfamiliar with investing.

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Coinbase said exchanges would report gross proceeds rather than net gains or cost basis, forcing individual taxpayers to perform complex reconciliations themselves.

The company argued this would be particularly problematic for small retail transactions and network fees, and would generate unnecessary paperwork.

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Coinbase specifically objected to including dollar-pegged stablecoins like USDC in the reporting requirement, calling those transactions non-taxable and an avoidable source of clutter.

Coinbase has signalled operational adjustments and criticised the rules for the current tax year.

The company plans to begin calculating customers' cost basis on their behalf starting next tax year to reduce the compliance burden going forward.

Coinbase's VP of tax, Lawrence Zlatkin, argued the new reporting regime will divert resources to low-value reporting and do a disservice to taxpayers, and the company has used this point to press for adjustments to the rules.

Industry observers offer practical guidance that mirrors Coinbase’s concerns.

They recommend consistent transaction tracking with crypto tax software, consulting advisors experienced with digital assets, and utilising tax-advantaged accounts where possible to reduce friction and risk of errors under the new system.

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Observers warn that first-year reporting noise will likely fall heaviest on retail users who lack sophisticated tax tools or advisory support.

Market analysts cited by the sources expect short-term price volatility as retail investors react to uncertainty, with potential selling pressure from fear or administrative burden.

Conversely, both Coinbase and other analysts argue that clearer, more actionable reporting rules over time could bolster institutional confidence and support long-term market growth if implemented sensibly.

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However, timing and magnitude of these effects remain uncertain and depend on enforcement details and future clarifications from the IRS.