Kraken, a crypto 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 forms covering transactions valued at less than $1, and over half being for $10 or less. Only 8.5% of the newly introduced Form 1099-DAs exceeded $600, the threshold that triggers reporting for non-employee compensation, with 74% being for less than $50, according to the company's Wednesday blog post. Each form is also sent to the customer, creating a reconciliation task for the taxpayer who receives it.
Furthermore, standard tax software does not handle crypto transactions, and Kraken estimates the additional burden on an active crypto holder to be $250-$500 per year for dedicated tax software, in addition to standard filing costs. "The time spent by taxpayers reconciling these micro-transactions, often with incomplete data, results in costs that are disproportionately high compared to any revenue the IRS will collect from them," Kraken stated. According to the Tax Foundation, individual returns already cost Americans a combined $146 billion in time and expenses, and the National Taxpayers Union Foundation estimates the average time for non-business filers to be around 13 hours and $290 per return. Brokers reporting for 2025 provide gross proceeds without cost basis, meaning the form shows what was sold but not what it was bought for.
Kraken received thousands of client inquiries about forms that only captured one side of the calculation. Two key issues Kraken identified two parts of the tax code that cause problems.
The first is the lack of a de minimis exemption for crypto payments, which means even small purchases with crypto can trigger a taxable event that needs to be declared. For example, "if you use Bitcoin to pay for a $7.99 meal at a restaurant, you have triggered a taxable event.
You are technically required to look up the cost basis of the specific Bitcoin you spent, calculate whether you had a gain or loss on that fraction of a coin, and report it on Form 8949," Kraken explained. This is the same argument made by the libertarian think tank Cato Institute, which stated that buying a cup of coffee every day with BTC "can result in over 100 pages of tax filings." The second issue is staking. Rewards earned on staked assets are treated as ordinary income at the moment of receipt, based on the token's market price that day.
Most holders keep those tokens instead of selling them, meaning they owe tax on tokens that haven't been sold. If the token price falls between receipt and filing, the tax can exceed the asset's current value. Kraken refers to this as phantom income and notes that a large share of the sub-dollar 1099-DAs it issued 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. According to Kraken, its systems and those of other exchanges already support both reporting methods, but the choice needs to be authorized.