Kraken has reported filing a staggering 56 million Form 1099-DA documents with the U.S. Internal Revenue Service (IRS) for the 2025 tax year, revealing the immense administrative burden created by current cryptocurrency tax regulations. The exchange disclosed these figures in a blog post on Wednesday, using the data to advocate for legislative changes.
The breakdown of the filings underscores the prevalence of small-value transactions. Approximately 18.5 million of the reported forms covered transactions worth less than $1, and more than half involved amounts of $10 or less. In total, 74% of all forms filed were for transactions under $50. Only 8.5% exceeded the $600 threshold that typically triggers reporting requirements for non-employee compensation under existing tax rules.
Kraken emphasized the practical challenges for taxpayers. Each 1099-DA form is also sent to the customer, creating a reconciliation task. The exchange noted that standard tax software does not adequately handle crypto transactions, estimating that active holders may incur an extra $250 to $500 per year for dedicated tax tools, on top of the time spent. This compounds an existing burden; citing estimates from the Tax Foundation and the National Taxpayers Union Foundation, Kraken pointed out that Americans already spend about $146 billion annually on individual tax returns.
A key issue highlighted is that brokers like Kraken are currently required to report only gross proceeds without cost basis information on the 1099-DA. This means the form shows what a customer sold but not the purchase price, leading to thousands of client inquiries about incomplete calculations.
Kraken identified two major flaws in the current tax code. First, the absence of a de minimis exemption for small crypto payments means even minor purchases, like a $7.99 meal paid with Bitcoin, create a taxable event requiring the calculation of cost basis and gain/loss on Form 8949. Second, the treatment of staking rewards as ordinary income at the moment of receipt creates potential for "phantom income." If a user receives staking rewards when a token's price is high but the value falls later, they may owe taxes on an amount exceeding the asset's current value. Kraken stated that a significant portion of its sub-$1 forms were related to these staking distributions.
In response, Kraken is actively lobbying Congress. While pending legislation includes a de minimis provision, it is currently limited to stablecoins. Kraken is pushing for a broader, inflation-indexed exemption for all digital assets with anti-abuse guardrails. The exchange also requests that taxpayers be given the choice to pay taxes on staking rewards either at receipt or at the time of sale, noting its systems already support both reporting methods.
