Kraken, a leading cryptocurrency exchange, has filed 56 million crypto transaction forms with the US Internal Revenue Service (IRS) for the 2025 tax year, with approximately 18.5 million of these transactions valued at less than $1 and over half at $10 or less. According to the company, only 8.5% of the newly introduced Form 1099-DAs exceeded the $600 threshold, which triggers reporting for non-employee compensation, while 74% were for less than $50.
Each form also requires the customer to complete a reconciliation task, and standard tax software does not support crypto transactions. As a result, Kraken estimates that active crypto holders face an additional burden of $250-$500 per year for specialized tax software, on top of standard filing costs.
The company argues that the time spent reconciling these micro-transactions, often with incomplete data, generates costs that are disproportionate to the revenue the IRS will collect. The Tax Foundation estimates that individual returns already cost Americans a combined $146 billion in time and expenses, while the National Taxpayers Union Foundation reports that the average time for non-business filers is around 13 hours and $290 per return.
Brokers reporting for 2025 provide gross proceeds without cost basis, resulting in forms that capture only one side of the calculation. Kraken received thousands of client inquiries about these forms. The company identifies two issues with the tax code: the lack of a de minimis exemption for crypto payments and the treatment of staking rewards as ordinary income at the moment of receipt. For example, using Bitcoin to pay for a $7.99 meal would trigger a taxable event, requiring the individual to calculate the cost basis of the specific Bitcoin spent and report it on Form 8949.
Similarly, rewards earned on staked assets are taxed as ordinary income, even if the tokens are not sold, resulting in what Kraken terms 'phantom income.' The company advocates for a broader inflation-indexed exemption and the option for taxpayers to elect when staking rewards are taxed, either at receipt or at sale. Kraken's systems, as well as those of other exchanges, already support both reporting methods, but congressional authorization is required.