According to a recent announcement by crypto exchange Kraken, the company filed approximately 56 million crypto-transaction forms with the U.S. Internal Revenue Service (IRS) for the 2025 tax year. Notably, around 18.5 million of these forms pertained to transactions valued at less than $1, with over half being worth $10 or less.
The newly introduced Form 1099-DA revealed that only 8.5% of the transactions exceeded the $600 threshold, which triggers reporting for non-employee compensation. Furthermore, a staggering 74% of the transactions were valued at less than $50. Each form is also sent to the customer, resulting in a reconciliation task for the taxpayer.
Additionally, standard tax software is not equipped to handle crypto transactions, with Kraken estimating the additional burden on an active crypto holder to be around $250-$500 per year for dedicated tax software, excluding standard filing costs. Kraken emphasized that the time spent by taxpayers reconciling these micro-transactions, often with incomplete data, generates costs that are disproportionate to the revenue the IRS will collect from them.
The Tax Foundation estimates that individual returns already cost Americans a combined $146 billion in time and expenses. The National Taxpayers Union Foundation reports that the average time spent on non-business filers is approximately 13 hours and $290 per return. For the 2025 tax year, brokers reported gross proceeds without cost basis, meaning the form only shows what was sold, not what it was bought for. Kraken received thousands of client inquiries regarding forms that only captured one side of the calculation.
The company identified two key issues with the tax code. Firstly, the lack of a de minimis exemption for crypto payments means that even small purchases made with crypto can trigger a taxable event that needs to be declared. For instance, using Bitcoin to pay for a $7.99 meal at a restaurant would technically require the individual to look up the cost basis of the specific Bitcoin spent, calculate whether they had a gain or loss on that fraction of a coin, and report it on Form 8949. The second issue lies in staking rewards, which are treated as ordinary income at the moment of receipt, based on the token's market price that day.
Most holders retain these tokens instead of selling them, resulting in tax obligations on tokens that haven't been sold. If the token price drops between receipt and filing, the tax can exceed the asset's current value, which Kraken refers to as phantom income.
A significant proportion of the sub-dollar 1099-DAs issued by the company were staking distributions. Legislation currently moving through Congress includes a de minimis provision, but it is limited to stablecoins. Kraken is advocating for a broader inflation-indexed exemption, paired with anti-abuse guardrails to prevent structuring.
The exchange is also urging Congress to allow taxpayers to choose when staking rewards are taxed, either at receipt under current rules or at sale, when a gain or loss is realized. Kraken claims that its systems, as well as those of other exchanges, already support both reporting methods, but the choice needs to be authorized.