In the 2025 tax year, cryptocurrency exchange Kraken filed approximately 56 million forms with the US Internal Revenue Service (IRS) related to crypto transactions. Notably, around 18.5 million of these forms were for transactions valued at less than $1, and over half were for transactions worth $10 or less. The newly introduced Form 1099-DA, which is used for these transactions, showed that only 8.5% of the filings exceeded the $600 threshold that triggers reporting requirements for non-employee compensation, while 74% were for less than $50.
This creates a substantial administrative task for taxpayers, who must also reconcile these forms with their own records. Furthermore, standard tax preparation software often does not support cryptocurrency transactions, resulting in additional costs for taxpayers, estimated by Kraken to be between $250 and $500 per year for dedicated tax software. The company argues that the time and effort spent on reconciling these micro-transactions are disproportionate to the potential revenue generated for the IRS. The Tax Foundation estimates that individual tax returns already cost Americans a combined $146 billion in time and expenses, with the average non-business filer spending around 13 hours and $290 per return, according to the National Taxpayers Union Foundation.
Kraken identifies two key issues with the current tax code: the lack of a de minimis exemption for cryptocurrency payments, which means that even small purchases can trigger a taxable event, and the treatment of staking rewards as ordinary income at the moment of receipt, which can result in 'phantom income' if the token's value decreases. The company is advocating for a broader, inflation-indexed exemption and the option for taxpayers to choose when staking rewards are taxed, either at receipt or at sale.