If you traded or earned cryptocurrency in 2025, you’re about to enter a new tax landscape. With the IRS rolling out new forms and tightening reporting rules, even small errors can lead to audits or unexpected bills.
Tax experts explained seven red flags that signal you might be making costly crypto tax mistakes, and what to do about them.
1. Ignoring Missing or Incomplete 1099-DA Forms
In early 2026, investors will receive Form 1099-DA for the first time ever for any sales or exchanges during 2025 that were executed on so-called “centralized exchanges,” according to Jessalyn Dean, a crypto 1099 expert and managing director at Dune Consultants.
Dean warned that centralized brokers have until early 2027 to issue these forms, so if you don’t receive one, flag that exchange now.
Sean Webster, a CPA and senior contributor at Precious Metal IRA Accounts, added that missing forms are one of the first signs your crypto records don’t match IRS data. “You need to verify all your transactions for proper reporting.”
Furthermore, mismatched or missing 1099s can trigger IRS notices like CP2000 letters, which will demand updates to your taxes and could result in a bill if not addressed, according to Michael Moffa, a financial advisor and the founder of Prosperity Tax Advisors. “The IRS expects all crypto income to be reported, regardless of whether a form is received,” Moffa said.
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2. Failing To Reconcile Transactions Across Wallets and Exchanges
Crypto investors often move assets between wallets and platforms, creating gaps or duplicates. Webster said these “cracks between platforms” cause missing transactions that distort gains and losses.
The first step to avoid crypto tax problems is maintaining careful financial documentation. “If you see differences in your total holdings or your histories do not match up, there is usually a mix-up with tracking or misclassifying your activity,” Webster said.
Moffa added that “unexplained inflows and outflows” or non-matching balances between exchanges usually mean transactions were misclassified or left out. “Internal transfers between your own wallets should not be reported as taxable events, but improper tracking can result in double-counting,” he said.
3. Misclassifying Crypto Activity
Each type of crypto activity is taxed differently and “confusing them will come back to bite you,” Webster warned. For example, treating staking or mining income as capital gains instead of ordinary income is a widespread error.
Dean clarified that staking rewards are taxable when earned, but only once investors have “dominion and control,” not when sold. Moffa agreed, noting that confusing these categories can result in over- or under-reporting income.
4. Misunderstanding Cost Basis Rules
Cost basis, the original purchase price or value of your crypto, determines whether you owe tax on a gain or qualify for a loss. Dean explained that 2025 Forms 1099-DA will not include cost basis data, so investors must calculate it themselves, and only on a wallet-by-wallet basis, according to the new IRS guidance.
Moffa added that “unrealistic gains or losses, inconsistencies in cost basic calculation methods and discrepancies between different tax software outputs” often signal tracking mistakes. Even one wrong entry in your purchase or sale date can lead to an unexpected tax bill. It’s a good idea to run all your data by a tax professional with crypto expertise.
5. Believing ‘No Form Means No Tax’
Some investors assume that if they don’t receive a 1099, they don’t owe taxes, but the IRS still expects complete reporting of all crypto income, Dean said. Moffa noted that private wallets and crypto-to-crypto trades aren’t exempt from tax either, though these are common myths that lead to serious compliance issues.
6. Waiting Until Tax Season To Check Records
The simplest way to avoid bigger issues is to get in the habit of reviewing your records regularly instead of waiting until tax time, Webster said.
“To catch issues before filing, investors should regularly reconcile transaction histories, track cost basis, monitor for airdrops and hard forks and review exchange statements,” Moffa added. Using reputable crypto tax software or consulting a tax professional can help uncover hidden mistakes or inconsistencies.
7. Failing To Fix Errors Promptly
If you discover an error, act fast. Webster said to gather all supporting documents and file an amended return immediately. “The sooner you fix an error, the less likely it is to turn into a real problem.” Keep detailed notes explaining corrections as these serve as proof if the IRS questions your report later.
Moffa agreed that quick action and documentation reduce your risk of fines and keep problems from becoming full audits.
Crypto taxation is evolving quickly, and mistakes can easily go unnoticed until the IRS flags them. By keeping meticulous records, using reputable tax software and seeking professional guidance, investors can avoid the most common crypto tax errors before they trigger penalties.
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This article originally appeared on GOBankingRates.com: Are You Making These 7 Crypto Tax Mistakes? Here’s How To Tell
