With cryptocurrency becoming an increasingly significant financial tool, the IRS has ramped up its efforts to ensure compliance within this space. By 2025, major changes will reshape the tax landscape for cryptocurrency investors and Web3 businesses alike. Understanding these updates and acting proactively can safeguard your finances and keep you compliant. Here’s a comprehensive guide on what to expect and how to prepare for this evolving regulatory environment.

1. The Introduction of the 1099-DA Form

One of the most impactful changes in 2025 will be the rollout of the 1099-DA tax form. Historically, crypto brokers, including exchanges and centralized entities, reported transactions to the IRS on a limited basis. Moving forward, these entities will provide detailed transaction reports through the 1099-DA form.

This change means:

• Every transaction you make will be visible to the IRS.
• There’s a higher likelihood of enforcement actions against under-reporting or non-compliance.
• Errors in reporting could lead to compliance issues or overpayment of taxes.

For crypto investors, now is the time to ensure all past transactions are accurately accounted for. Waiting for a tax notice from the IRS could result in hefty penalties, interest, or significant backlogs to resolve years of non-compliance.

2. Switch to Account-Based Accounting

Another crucial update comes from Revenue Procedure 2024-28, which mandates a shift from universal to account-based accounting for cryptocurrencies. Under the universal method, taxpayers accounted for assets like Ethereum collectively, regardless of their storage location.

The new account-based method requires:

• Tracking each cryptocurrency wallet or exchange account separately.
• Applying an accounting methodology individually for each wallet or account.

This change could significantly alter your capital gains calculations, and failure to comply might lead to audit adjustments with financial penalties.

Key Deadlines:

• By January 1, 2025, switch from universal to account-based accounting.
• Ensure standing orders are documented with brokers and for non-custodial wallets, specifying the accounting method for transferred assets.

Gone are the days of end-of-year cherry-picking transactions for the highest cost basis. Precision and ongoing compliance will now be critical.

3. Third-Party Reporting and Its Implications

Starting in 2025, third-party reporting through brokers will provide the IRS with unprecedented visibility into your crypto transactions. This increased transparency means:

• Greater scrutiny of tax filings.
• Higher stakes for accurate cost basis and gain/loss calculations.
• Reduced flexibility for post-transaction adjustments.

Proactively aligning your accounting practices with these reporting requirements will save time and money.

4. The Role of Accurate Crypto Accounting

Maintaining accurate accounting is not just about tax compliance; it also ensures:

• You pay only what is necessary in taxes.
• Your records withstand IRS scrutiny during an audit.

Switching to account-based accounting means your system must capture and manage data in real-time, adhering to the stricter compliance landscape. For businesses or investors behind on their accounting, resolving backlogs should be a top priority before January 1, 2025.

5. What This Means for Web3 Businesses and Investors

Whether you’re a casual crypto trader or a Web3 business managing multiple wallets, these updates emphasize the need for robust financial tracking. Businesses dealing with large volumes of transactions may find these requirements particularly challenging without adequate preparation.

Steps to Take Now:

• Update Your Accounting Systems: Transition to account-based tracking and ensure compliance with Revenue Procedure 2024-28.
• Leave Standing Orders: Inform brokers about the accounting methodologies for your wallets by the 2025 deadline.
• Seek Professional Assistance: Engaging with a tax professional familiar with cryptocurrency can simplify compliance and minimize errors.

6. How Camuso CPA Can Help

At Camuso CPA, we specialize in navigating the intricate world of cryptocurrency taxes and accounting. With the upcoming regulatory shifts, we’ve been proactive in educating clients and the industry at large. Our expertise includes:

• Helping clients switch from universal to account-based accounting.
• Ensuring compliance with Revenue Procedure 2024-28.
• Addressing backlogs in accounting or tax filings.

Don’t wait for an IRS notice to take action. The earlier you prepare, the better positioned you’ll be to mitigate risks and manage your financial future.

Final Thoughts

The IRS is ramping up cryptocurrency tax enforcement with major procedural and reporting changes in 2025. These shifts demand immediate action from crypto investors and Web3 businesses to ensure compliance. By updating your accounting practices and seeking professional guidance, you can confidently navigate this new era of crypto regulation.

For personalized support, reach out to Camuso CPA at camusocpa.com. Let’s get your crypto taxes in order today!

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Why This Matters

The increasing regulatory oversight underscores the maturing landscape of cryptocurrency as an asset class. As this space evolves, staying informed and compliant will be key to safeguarding your investments and capitalizing on opportunities in the digital economy.

Get ahead of the curve, and don’t let the 2025 deadlines catch you off guard. Start preparing today!