Kraken, a cryptocurrency exchange, has filed 56 million crypto transaction forms with the U.S. Internal Revenue Service (IRS) for the 2025 tax year. Approximately 18.5 million of these forms pertained to transactions valued at less than $1, with over half being for $10 or less. 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 is also sent to the customer, resulting in a reconciliation task for the taxpayer. Standard tax software does not support crypto transactions, and Kraken estimates that the additional burden on an active crypto holder is between $250 and $500 per year for dedicated tax software, excluding standard filing costs. The company notes that the time spent reconciling these micro-transactions, often with incomplete data, generates costs 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.
Brokers reporting for 2025 provide gross proceeds without cost basis, leading to client questions about forms that only capture one side of the calculation. Kraken identifies two problems: the lack of a de minimis exemption for crypto payments and the treatment of staking rewards as ordinary income at the moment of receipt.
The company argues that buying small items with crypto can trigger a taxable event, and rewards earned on staked assets can result in 'phantom income.' Kraken is advocating for a broader inflation-indexed exemption and the option for taxpayers to elect when staking rewards are taxed, either at receipt or at sale.